Dynamic Shift to a Basket-Peg or Floating Regime in East Asian Countries in Response to the People’s Republic of China’s Transition to a New Exchange Rate Regime
Yoshino, Naoyuki; Kaji, Sahoko; Asonuma, Tamon | February 2015
Abstract
This paper analyzes a desirable transition path for East Asian countries given the People’s Republic of China’s (PRC’s) transition to a new exchange rate regime. It attempts to answer two main questions: (i) Would these countries be better off shifting to either a basket peg or a floating regime following the PRC’s transition to a basket peg regime? (ii) How and when should these countries shift to the desired regime? The paper captures the influence of the PRC’s predetermined shift in its exchange rate regime on East Asian countries’ decisions regarding their optimal transition policies based on a dynamic stochastic general equilibrium (DSGE) model of a small open economy. Our calibration exercise using Malaysian and Singapore data from the first quarter (Q1) of 2000 to Q4 2012 reveals that a gradual adjustment to a basket peg is the most desirable policy for both countries. A sudden shift to a basket peg is superior to maintaining a dollar peg in Malaysia, but not in Singapore. Finally, a sudden shift to a floating regime is even worse than maintaining a dollar peg in both countries.
Citation
Yoshino, Naoyuki; Kaji, Sahoko; Asonuma, Tamon. 2015. Dynamic Shift to a Basket-Peg or Floating Regime in East Asian Countries in Response to the People’s Republic of China’s Transition to a New Exchange Rate Regime. © Asian Development Bank Institute. http://hdl.handle.net/11540/9632.Keywords
Macroeconomic
Macroeconomic Analysis
Macroeconomic Framework
Macroeconomic Models
Macroeconomic Performance
Macroeconomic Planning
Macroeconomic Policies
Macroeconomic Reform
Macroeconomic Stabilization
Results-Based Monitoring And Evaluation
Project Evaluation & Review Technique
Project Evaluation
Program Evaluation
Performance Evaluation
Operations Evaluation
Evaluation Methods
Evaluation
Social condition
Economic dependence
Economic assistance
International monetary relations
International monetary relations
International trade
National accounting
Market
Project impact
Development projects
Program management
Performance appraisal
Project appraisal
Technology assessment
Economic indicators
Growth models
Gross domestic product
Macroeconomics
Economic forecast
Exports
Exports
Exchange
Comparative economics
Index number
Monetary policy
Value analysis
Adjustment cost
Transaction cost
Conditionality
International relations
Cumulative effects assessment
Grievance procedures
Participatory monitoring and evaluation
Exchange rate
Economic development projects
Economic policy
Economic forecasting
Exchange rates
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http://hdl.handle.net/11540/9632Metadata
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Dynamic Shift to a Basket-Peg or Floating Regime in East Asian Countries in Response to the People's Republic of China's Transition to a New Exchange Rate Regime
Yoshino, Naoyuki; Kaji, Sahoko; Asonuma, Tamon (Asian Development Bank, 2015-02-15)This paper analyzes a desirable transition path for East Asian countries given the People’s Republic of China’s (PRC’s) transition to a new exchange rate regime. It attempts to answer two main questions: (i) Would these countries be better off shifting to either a basket peg or a floating regime following the PRC’s transition to a basket peg regime? (ii) How and when should these countries shift to ...This paper analyzes a desirable transition path for East Asian countries given the People’s Republic of China’s (PRC’s) transition to a new exchange rate regime. It attempts to answer two main questions: (i) Would these countries be better off shifting ... -
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