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Are the East Asian Currencies still Misaligned? An analysis based on absolute PPP-Income relationship using panel data

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  • Taizo Motonishi

Abstract

Over 10 years after the currency crisis, the degree of exchange rate misalignment is still an issue of contention for East Asian countries. This study evaluates the degrees of currency misalignment of Korea, China, Malaysia, Thailand, the Phillipines, and Indonesia by examining absolute purchasing power parity (PPP)-income relationships using panel data. The distinction between local currency misalignments and the US dollar misalignment is stressed. The estimated misalignments in 2007 were 22.4 per cent overvaluation for the Indonesian rupiah, 12.5 per cent overvaluation for the Philippine peso, and 15.6 per cent undervaluation for the Malaysian ringgit.

Suggested Citation

  • Taizo Motonishi, 2009. "Are the East Asian Currencies still Misaligned? An analysis based on absolute PPP-Income relationship using panel data," Asia Pacific Economic Papers 381, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:csg:ajrcau:381
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    File URL: https://crawford.anu.edu.au/pdf/pep/apep-381.pdf
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    References listed on IDEAS

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    1. Mr. Atsushi Iimi, 2006. "Exchange Rate Misalignment: An Application of the Behavioral Equilibrium Exchange Rate (BEER) to Botswana," IMF Working Papers 2006/140, International Monetary Fund.
    2. OGAWA Eiji & SHIMIZU Junko, 2007. "Progress toward a Common Currency Basket System in East Asia," Discussion papers 07002, Research Institute of Economy, Trade and Industry (RIETI).
    3. Motonishi, Taizo, 2002. "Modifications of the Balassa-Samuelson Model: The Effects of Balanced Growth and Capital Accumulation," Journal of the Japanese and International Economies, Elsevier, vol. 16(1), pages 31-49, March.
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    6. Jeffrey Frankel, 2006. "On the Yuan: The Choice between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate," CESifo Economic Studies, CESifo Group, vol. 52(2), pages 246-275, June.
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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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