Exchange rate management in selected East Asian countries after the financial crisis

Taguchi, Hiroyuki (2002): Exchange rate management in selected East Asian countries after the financial crisis. Published in: WASEDA Review of Socio-science , Vol. 8, (2002): pp. 215-226.

Abstract

his article examined post-crisis exchange rate management in selected East Asian countries in terms of exchange rate regimes and targeting. The main findings from our empirical studies are as follows: As far as can be seen from the recent developments of exchange rate arrangements in countries analyzed according to the IMF classification, it appears that the hypothesis of the corner solution with a “hard peg” or “free float” has taken hold in the post-crisis period. However, when we analyze the de facto regimes by examining the volatilities of foreign exchange reserves, we can speculate that the countries analyzed, except for Malaysia, are in fact holding to the “soft peg” even in the post-crisis period, regardless of their announcement in favor of the “free float”. The next issue to consider is what kind of factors determine the targeted reference rate. Post-crisis exchange rate targeting appears to be somewhat different from the simple US dollar standard in the pre-crisis period. Empirical evidence shows that some countries have come to value inflation adjustment in exchange rate targeting in addition to the US dollar linkage during the post-crisis period.

• Item Type: MPRA Paper
• Language: English
• Keywords: exchange rate, East Asian countries, financial crisis
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange

References

ADB (Asian Development Bank). 1998. Asian Development Outlook 1998. 23-37. Manila.

ADB. 2001. Asia’s Globalization Challenge. Asian Development Outlook 2001. 161-201. Manila.

Calvo, Guillermo A., and Carmen M. Reinhart. 2000. Fear of Floating. NBER Working Paper No. 7993. Cambridge, Massachusetts: National Bureau of Economic Research.

Fischer, Stanley. 2001. Exchange Rate Regimes: Is the Bipolar View Correct? This paper was prepared for the 2001 American Economic Association meetings, Washington, D.C: International Monetary Fund.

Fischer, Stanley. 1999. On the Need for a Lender of Last Resort. Address to the American Economic Association. New York. January 3.

Frankel, Jeffrey A., and S. J. Wei. 1994. “Yen Bloc or Dollar Bloc? Exchange Rate Policies in the East Asian Economies.” In Takatoshi Ito and Anne Krueger, eds., Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flow. NBER-East Asia Seminar on Economics 3. Chicago: University of Chicago Press.

Frankel, Jeffrey A., Sergio Schmukler, and Luis Serven. 2000. Verifiability and the Vanishing Exchange Rate Regime. This paper was prepared for the Brookings Trade Forum 2000: Policy Challenges in the Next Millenium, April 27-28, 2000, Washington, D.C.

IMF (International Monetary Fund). 1998. World Economic Outlook: May 1998. 3-7. Washington, D.C.

IMF. 1999. Exchange Rate Arrangements and Currency Convertibility: Developments and Issues. World Economic and Financial Surveys. 23-46. Washington, D.C.

IMF. 2001. International Financial Statistics. June 2001, and previous issues. Washington, D.C.

JP Morgan. 2001. JP Morgan Real Broad Effective Exchange Rate Indices, July 2001. [http://www.jpmorgan.com/MarketDataInd/Forex/currIndex.html]

Mckinnon, Ronald. 2000. The East Asian Dollar Standard, Life after Death? Economic Notes 29 (1, February). 31-82.

Mckinnon, Ronald. 2001. After the Crisis, the East Asian Dollar Standard Resurrected: an Interpretation of High-frequency Exchange Rate Pegging. In Joseph E. Stiglitz and Shahid Yusuf, eds., Rethinking the East Asian Miracle (Chapter 5). 197-246. Washington, D.C: World Bank.

Ohno, Kenichi. 1999. Exchange Rate Management in Developing Asia: Reassessment of the Precrisis Soft Dollar Zone. ADBI Working Paper 1 (January). Tokyo: Asian Development Bank Institute.

Poirson, Helene. 2001. How Do Countries Choose Their Exchange Rate Regime? IMF Working Paper WP/01/46. Washington, D.C: international Monetary Fund.

Taguchi, Hiroyuki. 1998. Exchange Rate Movements and Trade Balances in Selected ASEAN Countries. Scio-Science 4: 187-207. Tokyo: Waseda University.

World Bank. 1998. East Asia: The Road to Recovery. 1-18. Washington, D.C.

World Bank. 2000. East Asia: Recovery and Beyond. 19-43. Washington, D.C.