Exchange Rate Coordination in Asia: Evidence Using the Asian Currency Unit

Abstract

This paper evaluates the extent of exchange rate coordination among Asian economies using a hypothetical Asian Currency Unit. Rising interdependence among Asian economies makes it vital for these economies to have a certain degree of exchange rate stability. However, the empirical evidence using an Asian Currency Unit suggests a widening deviation in exchange rate movements of the Asian currencies. The deviation has been driven by the adoption of different exchange rate regimes by the participating countries indicating diverse policy objectives.

Keywords: exchange rate coordination, Asia, Asian currency unit, exchange rate regimes

JEL Classification: F36, F55, F15