Export Similarity, FDI and Yen-Synchronization of East Asian Currencies: Regime Switching Regression Model and Microstructural Analysis

30 Pages Posted: 12 Apr 2010

See all articles by Bong-Han Kim

Bong-Han Kim

Kongju National University

Seeun Jeong

Chungnam National University - Department of International Economics

Hong-Ghi Min

Korea Advanced Institute of Science and Technology - Department of Management Science

Date Written: April 12, 2010

Abstract

Using a regime-switching regression model, we provide evidence of the synchronization of East Asian (Korea, Thailand, the Philippines, Indonesia, and Taiwan) currencies-dollar exchange rates with yen dollar exchange rates and report that the export similarity index and FDI between Japan and this group of countries are two main determinants of yen synchronization in the region. Our estimation results are robust with different econometric techniques.

We also investigate the microstructural characteristics of yen synchronization and show that the synchronization period persists once it has begun and the volatility of dollar exchange rates is higher during synchronization than during de-synchronization.

Finally, we conclude that those findings support the idea of a so-called “yen bloc”. However, as opposed to traditional arguments, we show that yen synchronization is driven not by increased exports and imports in this area but by increased export similarity in the region and FDI between Japan and East/Southeast Asian countries

Keywords: Export similarity, FDI, yen synchronization, Markov switching regression model

JEL Classification: F21

Suggested Citation

Kim, Bong-Han and Jeong, Seeun and Min, Hong-Ghi, Export Similarity, FDI and Yen-Synchronization of East Asian Currencies: Regime Switching Regression Model and Microstructural Analysis (April 12, 2010). Available at SSRN: https://ssrn.com/abstract=1588368 or http://dx.doi.org/10.2139/ssrn.1588368

Bong-Han Kim (Contact Author)

Kongju National University ( email )

Shinkwandong
Gongju Choongnam
Korea, Republic of (South Korea)

Seeun Jeong

Chungnam National University - Department of International Economics ( email )

Daejon, 34134
Korea, Republic of (South Korea)

Hong-Ghi Min

Korea Advanced Institute of Science and Technology - Department of Management Science ( email )

373-1 Kusong-dong
Yuson-gu
Taejon 305-701, 130-722
Korea, Republic of (South Korea)

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