AMU Deviation Indicator for Coordinated Exchange Rate Policies in East Asia and its Relation with Effective Exchange Rates

執筆者 OGAWA Eiji  (Graduate School of Commerce and Management, Hitotsubashi University / Faculty Fellow, RIETI) /SHIMIZU Junko  (Institute of Economic Research, Hitotsubashi University)
発行日/NO. 2006年1月  06-E-002


The monetary authorities in East Asian countries have been strengthening their regional monetary cooperation since the Asian Currency Crisis in 1997. In this paper, we propose a deviation measurement for coordinated exchange rate policies in East Asia to enhance the monetary authorities' surveillance process for their regional monetary cooperation. We calculate the AMU as a weighted average of East Asian currencies following the method used to calculate the European Currency Unit (ECU) and the AMU Deviation Indicators, which how the degree of deviation from the hypothetical benchmark rate for each of the East Asian currencies in terms of the AMU.

Furthermore, we investigate the relationships between the AMU and its Deviation Indicators and the effective exchange rates of each East Asian currency. As a result, we found the strong relationships between the AMU or the AMU Deviation Indicators and the effective exchange rates except for some currencies. These results indicate that the AMU Deviation Indicators have positive relationship with their effective exchange rates. Accordingly, we should monitor both the AMU and the AMU Deviation Indicator for the monetary authorities' surveillance in order to stabilize effective exchange rate in terms of trader partners' currencies.

Published: Eiji Ogawa and Junko Shimizu, 2006. "AMU Deviation Indicators for Coordinated Exchange Rate Policies in East Asia and their Relationships with Effective Exchange Rates," The World Economy, Vol. 29(12), pp. 1691-1708.