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What Should the Weights of the Three Major Currencies be in a Common Currency Basket in East Asia? *
Author(s) -
Kawasaki Kentaro,
Ogawa Eiji
Publication year - 2006
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/j.1467-8381.2006.00225.x
Subject(s) - currency , east asia , economics , liberian dollar , reserve currency , devaluation , international economics , monetary economics , foreign exchange risk , china , geography , finance , archaeology
We consider what type of regional common currency should be introduced in East Asia in the future. The common currency basket is, in itself, more desirable as an anchor currency. In this paper we define two types of currency basket and investigate the long‐term sustainability of adopting a common currency basket in East Asia. From our empirical results, a larger weight (but less than 100 percent) for the US dollar in the common currency basket tends to make bilateral exchange rates among East Asian countries stable in the long run.