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Extent Of Exchange Rate Coordination In Asia

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  • ABHIJIT SEN GUPTA

    (India Resident Mission, Asian Development Bank, 4 San Martin Marg, Chanakyapuri, New Delhi 110021, India)

Abstract

High level of intra-regional trade and negative spillovers from competitive devaluation make exchange rate coordination extremely desirable in Asia. Employing a hypothetical Asian Currency Unit we evaluate the degree of coordination among Asian currencies. Traditional empirical tests yield little evidence of coordination among real and nominal exchange rates. However, introducing endogenously determined structural breaks to account for changes in exchange rate regimes provides more mixed evidence. While there is still little evidence for coordination in nominal terms, some degree of coordination among real rates emerges. The limited evidence for exchange rate coordination can be explained by the diverse exchange rate regimes prevailing in these economies, signaling differences in policy objectives.

Suggested Citation

  • Abhijit Sen Gupta, 2015. "Extent Of Exchange Rate Coordination In Asia," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 60(02), pages 1-25.
    • Handle: RePEc:wsi:serxxx:v:60:y:2015:i:02:n:s0217590815500137
    DOI: 10.1142/S0217590815500137
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    More about this item

    Keywords

    Asian currency unit; currency coordination; structural breaks; exchange rate regimes; panel unit root; F33; F36; N15; E58;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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