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Optimal common currency basket in East Asia

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  • Victor Pontines

Abstract

This article employs the currency invariant index due to Hovanov et al. (2004) to construct an optimal or stable common G-3 currency basket across different groups of countries in East Asia. Calculated optimal weights show a larger weight for the US dollar but a nonnegligible role for the Japanese yen. The volatility of the optimal common G-3 currency basket is several times smaller than that of a similarly proposed common G-3 currency basket in East Asia.

Suggested Citation

  • Victor Pontines, 2009. "Optimal common currency basket in East Asia," Applied Economics Letters, Taylor & Francis Journals, vol. 16(11), pages 1139-1141.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:11:p:1139-1141
    DOI: 10.1080/13504850701335392
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    References listed on IDEAS

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    1. John Williamson, 2005. "A Currency Basket for East Asia, Not Just China," Policy Briefs PB05-01, Peterson Institute for International Economics.
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    Cited by:

    1. Aihua Wang & Faruk Balli & Xiumin Li, 2015. "Possible Best Currency Basket Selection from the Perspective of Real Effective Exchange Rate," Pacific Economic Review, Wiley Blackwell, vol. 20(4), pages 635-650, October.
    2. Pontines, Victor, 2015. "How useful is an Asian Currency Unit (ACU) index for surveillance in East Asia?," Economic Systems, Elsevier, vol. 39(2), pages 269-287.
    3. Zhang, Zhichao & Shi, Nan & Zhang, Xiaoli, 2011. "China’s new exchange rate regime, optimal basket currency and currency diversification," MPRA Paper 32642, University Library of Munich, Germany.
    4. Kunkler, Michael, 2023. "A stable aggregate currency revisited: Highlighting some fundamental issues," Economics Letters, Elsevier, vol. 231(C).
    5. Giudici, Paolo & Leach, Thomas & Pagnottoni, Paolo, 2022. "Libra or Librae? Basket based stablecoins to mitigate foreign exchange volatility spillovers," Finance Research Letters, Elsevier, vol. 44(C).
    6. Pontines, Victor & You, Kefei, 2015. "Asian Currency Unit (ACU), deviation indicators and exchange rate coordination in East Asia: A panel-based convergence approach," Japan and the World Economy, Elsevier, vol. 36(C), pages 42-55.

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