Evaluating the Economic Criteria of Asia-Pacific Regional Currency: Empirical Testing for Panel Data

• Main Authors: Winnie Lin, 林汶玲
• Other Authors: J. H. Chen
• Format: Others
• Language: zh-TW
• Published: 2000
• Online Access: http://ndltd.ncl.edu.tw/handle/10223718187487008705

碩士 === 中原大學 === 企業管理學系 === 88 === To create a single currency in Asia is not only of a great advantage to stabilizing the exchange rate and attracting international capital inflow, but also contribute to contend with the U.S. dollar and the Euro dollar in the international monetary. That''s why some of the governments such as Malaysia and the Republic of China strongly suggested the idea for integrating the Asian dollar. In a speech on "Optimal Currency Areas and Capital Market for the New Economy" during the 2000 World Congress on Information Technology held in Taipei, Mundell, respectfully known as "The Father of the Euro Dollar", expressed his support for developing a regional currency in the Asia-Pacific area to prevent a second financial crisis in the region. This paper used the pooled cross-sectional and time-series data during the 1991-1999 period to test for the determinants across nine Asia-Pacific countries. Using empirical models of Partial Adjustment and Seemingly Unrelated Regression, we also examine the role of macroeconomic factors that play in explaining the exchange rate by following the theoretical model by Somanath(1986). Most notably, this paper attempts to find what criterion are necessary for the exchange rate stability for the monetary integration in Asia. Also the adjustment speed of exchange rate for the monetary regime and each of countries would be discussed separately as well. The main empirical results present as below: (1).The relation between foreign exchange rate and the inflation rate in Japan and Taiwan do not support Purchasing Power Parity(PPP). Also, monetary supply in the six countries including Taiwan, Thailand, Singapore, Malaysia, China and Indonesia is different from the theoretics. (2). We also uncover evidence about adjustment speed of exchange rate. Our finding suggests that the policy makers can effectively use regional policy instrument to bring the current exchange rate to the desired level by control of the useful macroeconomic factors. In particular, It is more easily and quickly for exchange rate adjusting to desired level especially during the currency crisis period. (3). It is shown that macroeconomic variation of the inflation rate, current account balance, debt, and interest rate play a statistically significant role to change the single currency regime. This suggests that these determinants could be the indicators of exchange rate stability. The results also provide further information for the debate on the usefulness macroeconomic variables of creating the Asia-dollar criteria. (4). The results also indicate that currency crisis in Southeast Asia still had impact in either the regional monetary regime or each of the countries separately except for China. The estimated results show that single currency integration in Asia may slow down the impact of volatility and stability of foreign exchange rate during the currency crisis.