How Did the Dollar Peg Fail in Asia? / Takatoshi Ito, Eiji Ogawa, Yuri Nagataki Sasaki.

Format:

Book

Author/Creator:

Ito, Takatoshi.

Contributor:

National Bureau of Economic Research.

Ogawa, Eiji, 1957-

Sasaki, Yuri Nagataki.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6729.

NBER working paper series no. w6729

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

In this paper we have constructed a theoretical model in which Asian firms maximize their profit, competing with Japanese and US firms in their markets. The duopoly model is used to determine export prices and volumes in response to the exchange rate fluctuations vis-...-vis the Japanese yen and the US dollar. Then, the optimal basket weight to minimize the fluctuation of the growth rate of trade balance is derived. These are the novel features of our model. The export price equation and export volume equation are estimated for several Asian countries for the sample period of 1981 to 1996. Results are generally reasonable. The optimal currency weights for the yen and the US dollars are derived and compared with actual weights that had been adopted before the currency crisis of 1997. For all the countries in the sample, it is shown that the optimal weight of the yen is significantly higher than the actual weight.

Notes:

Print version record

August 1999.