Currency Linkages among ASEAN

Chin, Lee and Azali, M (2010): Currency Linkages among ASEAN. Published in: Singapore Economic Review , Vol. 55, No. 3 (2010): pp. 459-470.

Abstract

The purpose of this study is to examine the potential linkages among ASEAN-5 currencies, in particular the possibility of Singapore dollar bloc during the pre- and post crisis periods by using Johansen multivariate cointegration test and Granger causality test. Significant non-stationarity, and the presence of unit roots were documented for each currency under both study periods. Using ASEAN-4 exchange rates against Singapore dollar, Johansen cointegration test showed that there was no cointegrating relationship during the pre-crisis period, however there were two statistically significant cointegrating vectors among ASEAN exchange rates for the post-crisis period. These findings imply that there is low financial integration before the crisis, but ASEAN countries are financially more integrated after the crisis. This finding also indicated the increasingly important role of the Singapore dollar in ASEAN. Therefore, Singapore dollar may be a possible candidate as the common currency for ASEAN. The analysis is repeated by adding US dollar to the model. The finding ascertains the influence of US dollar on ASEAN currencies before the crisis.

• Item Type: MPRA Paper
• Language: English
• Keywords: Exchange Rate, Cointegration, Granger-causality, ASEAN
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F33 - International Monetary Arrangements and Institutions

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