Post-crisis Exchange Rate Regimes in ASEAN:A New Empirical Test Based on Intra-daily Data (Forthcoming in "Singapore Economic Review". )

The purpose of this paper is to investigate what affected the post-crisis exchange rates of three ASEAN countries: Singapore, Thailand, and Malaysia. Our critical departure from previous studies is the use of intra-daily exchange rates. The use of the intra-daily data is useful in removing possible estimation biases which the choice of numeraire may cause. It can also contrast exchange rate movements during the time zone when the government intervention is active with those when the intervention is not active. We examine how and when the ASEAN currencies changed their correlations with the U.S. dollar and the Japanese yen. We find significant structural breaks in the correlations during the time zone when East Asian market is open. In the post-crisis period, the first structural break happened when Malaysia adopted the fixed exchange rate and the second break happened when some East Asian countries introduced inflation targeting. The structural breaks suggest strong monetary and real linkages among the ASEAN countries.