Amu Deviation Indicators for Coordinated Exchange Rate Policies in East Asia and Their Relationships with Effective Exchange Rates

18 Pages Posted: 13 Dec 2006

See all articles by Eiji Ogawa

Eiji Ogawa

Hitotsubashi University; Research Institute of Economy, Trade and Industry (RIETI)

Junko Shimizu

Meikai University

Abstract

After the Asian currency crisis in 1997, the monetary authorities of East Asian countries have been strengthening their regional monetary cooperation. In this paper, we propose a deviation measurement for coordinated exchange rate policies in East Asia to enhance the monetary authorities' surveillance process for their regional monetary cooperation. We calculate an Asian Monetary Unit (AMU) as a weighted average of East Asian currencies following the method used to calculate the European Currency Unit (ECU). Also, we calculate AMU Deviation Indicators which show how much each of the East Asian currencies deviates from a hypothetical benchmark rate in terms of the AMU. Furthermore, we investigate relationships between the AMU Deviation Indicators and the effective exchange rates, which mean international price competitiveness in terms of international trade. We found strong relationships between the AMU Deviation Indicators and the effective exchange rates except for some currencies. The results suggest that monitoring the AMU Deviation Indicator will be useful for the monetary authorities' surveillance in East Asia in order to stabilise their effective exchange rate or price competitiveness among the East Asian countries.

Suggested Citation

Ogawa, Eiji and Shimizu, Junko, Amu Deviation Indicators for Coordinated Exchange Rate Policies in East Asia and Their Relationships with Effective Exchange Rates. The World Economy, Vol. 29, No. 12, pp. 1691-1708, December 2006. Available at SSRN: https://ssrn.com/abstract=951338 or http://dx.doi.org/10.1111/j.1467-9701.2006.00864.x

Eiji Ogawa (Contact Author)

Hitotsubashi University ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8601
Japan

Research Institute of Economy, Trade and Industry (RIETI) ( email )

1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
Japan

Junko Shimizu

Meikai University ( email )

Urayasu, Chiba 279-8550
Japan

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