Currency Policy Coordination оf Asean Countries: Foreign Trade Effects

• Main Author: Yana Valeryevna Dyomina
• Format: Article
• Language: Russian
• Published: Economic Research Institute of the Far East Branch of the Russian Academy of Sciences 2015-12-01
• Series: Prostranstvennaâ Èkonomika
• Subjects: сurrency policy; coordination; national currency; volatility; revaluation; devaluation; currency basket; export; import; foreign trade effects; ASEAN
• Online Access: http://spatial-economics.com/eng/images/spatial-econimics/4_2015/SE.2015.4.098-116.%20Dyomina.pdf

The study estimates foreign trade effects of currency policy measures in ASEAN countries. On the base of exchange rate dynamics the author concludes that during the period of 2000-2014 ASEAN countries in general used competitive devaluation policy of national currencies to CNY, JPY, KRW and EUR and revaluation to USD. To eliminate negative effects of competitive devaluation policy the paper proposes currency policy coordination of ASEAN countries that could be done by pegging of national currencies to a common basket. Employing the SAC (Stable Aggregate Currency) method the author suggests 4 options for a common currency basket. The researcher estimates foreign trade effects of currency policy coordination in ASEAN countries for every option of a currency basket in three following cases: ASEAN as a whole, ASEAN-6 and ASEAN-4. The author concludes that the optimal form of currency policy coordination in ASEAN is pegging of exchange rates of national currencies to a common basket composed of 13 East Asian currencies. This currency basket option has maximum foreign trade effects for the Association as a whole and by sub-groups of ASEAN-6 and ASEAN-4 when it devaluates to the U.S. dollar