Estimation of Asian Effective Exchange Rates: A Technical Note
34 Pages Posted: 20 Sep 2007
Date Written: October 2006
Abstract
Discussion of exchange rate policy in Asia would benefit from appropriate measures of exchange rates on a multilateral basis. The purpose of this paper is to refine the construction of the effective exchange rates (EERs) for Asian economies, to make allowances for the role of Hong Kong SAR as an entrepôt and to reflect the fast-growing intra-regional trade. For the scenarios under consideration, it turns out that adjusting for re-export trade through Hong Kong SAR is generally more important in the determination of trade weights than updating the base year. The proposed refinements have important policy implications, particularly in estimating the relative sizes of currency blocs, should the region's exchange rate policies become more oriented to trade baskets than to bilateral dollar rates.
Keywords: Effective exchange rates, intra-regional trade
JEL Classification: F10, F31
Suggested Citation: Suggested Citation
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