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Stabilization of effective exchange rates under common currency basket systems

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  • Stabilization of effective exchange rates under common currency basket systems
  • Ogawa, Eiji; Shimizu, Junko
  • National Bureau of Economic Research


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Title Stabilization of effective exchange rates under common currency basket systems
Similar Titles
Material Type Reports
Author(English)

Ogawa, Eiji; Shimizu, Junko

Publisher

Cambridge:National Bureau of Economic Research

Date 2006-04
Series Title; No NBER Working Paper Series / 12198
Pages 39
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Original Format pdf
Subject Economy < Financial Policy
Holding National Bureau of Economic Research

Abstract

We investigate the extent to which a common currency basket peg would stabilize effective exchange rates of East Asian currencies. We use an AMU (Asian Monetary Unit), which is a weighted average of ASEAN10 plus 3 (Japan, China, and Korea) currencies, as a common currency basket to investigate the stabilization effects. We compare our results with another result on stabilization effects of the common G3 currency (the US dollar, the Japanese yen, and the euro) basket in the East Asian countries (Williamson (2005)). We obtained the following results: first, the AMU peg system would be more effective in reducing fluctuations of the effective exchange rates as more countries applied the AMU peg system in East Asia. Second, the AMU peg system would more effectively stabilize the effective exchange rates than a common G-3 currency basket peg system for four (Indonesia, the Philippines, South Korea and Thailand) of the seven countries. (The rest omitted)