Monetary Policy Synchronization in the ASEAN-5 Region: An Exchange Rate Perspective
نویسندگان
چکیده
In light of the longstanding vision of economic and monetary integration in the ASEAN region and the importance of coordinating monetary policies to achieve it, the objective of this paper is to the assess the monetary policy synchronization among the founding members of the ASEAN, i.e., Indonesia, Malaysia, Philippines, Singapore and Thailand. Due to the importance of exchange rate movements to the coordination of monetary policies, we approach this issue from a currency exchange rate perspective. Specifically, multivariate trend-cycle decomposition is employed to investigate common trends and common cycles among the exchange rates of these countries during the period 1976 to 2012. Our analysis reveals that the real exchange rates of Malaysia, Philippines, Singapore and Thailand share common cycles in the short term and have common trends in the long term, but the Indonesian currency does not share these relationships. Thus, our results augur well for the synchronization of monetary policies among Malaysia, Philippines, Singapore and Thailand. In contrast, the relatively turbulent dynamics of the Indonesian Rupiah evident in frequent bouts of stark depreciation separated by periods of steady depreciation over the past three decades raise questions regarding the readiness of Indonesia for participating in a monetary alliance with the ASEAN-4 nations. JEL Classification: F31, F33, F36
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