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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 16, No. 2, pp.119-181
ISSN: 1225-0279 (Print)
Print publication date 31 May 2003
Received 29 Oct 2003 Revised 13 Jan 2004

Exchange Rate Regimes in East Asia After the Crisis: Implications from Intra-Daily Data

Shin-ichi Fukuda ; Sanae Ohno
Professor, Faculty of Economics, University of Tokyo, Hongo Bunkyo-ku Tokyo 113, JAPAN, Fax: +81-3-5841-5521 sfukuda@e.u-tokyo.ac.jp
Associate Professor, Department of Commerce, Takachiho University

JEL Classification: F31, F33, F36

Abstract

The purpose of this paper is to investigate what affected the post-crisis exchange rates of five East Asian countries: Singapore, Thailand, Korea, Taiwan, and Malaysia. Based on intra-daily observations, we examine how and when these five East Asian currencies changed their correlations with the U.S. dollar and the Japanese yen. During the time zones when East Asian markets were closed, the East Asian currencies kept strong correlations with the U.S. dollar throughout the pos-crisis period. We, however, find structural breaks in the correlations during the time zones when East Asian markets were open. In the post-crisis period, the first structural break arose when Malaysia adopted the fixed exchange rate. The second structural break occurred when Indonesia and Thailand introduced inflation targeting. The structural breaks suggest strong monetary and real linkage among East Asian countries. After early 2000, the East Asian currencies increased correlations with the U.S. dollar and began reverting back to de facto pegs against the U.S. dollar in terms of their growth rates.

Keywords:

Exchange rates, East Asia, Intra-daily data

Acknowledgments

An early version of this paper was presented at the Eleventh Seoul Journal of Economics International Symposium. We would like to thank Eiji Ogawa. Yong-Sang Shyn, and conference participants for helpful comments on earlier versions of this paper. Fukudas research is supported by Japanese Government, Ministry of Education Aid for Science Research on Priority Area #12124203.

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