Mr.Vladimir Klyuev

To-Nhu Dao

This paper examines exchange rate behavior in the ASEAN-5 countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand). It finds that for the last 10 years there is no evidence that their central banks target particular exchange rate levels against any currency or basket. Thus, contrary to some assertions, they do not belong to a U.S. dollar club, a Japanese yen club, a Chinese renminbi club, or an ASEAN club. At the same time, they clearly try to smooth short-term volatility, particularly vis-à-vis the U.S. dollar. The degree of smoothing declined noticeably after the Asian Financial Crisis and less obviously after the Global Financial Crisis, with heterogeneity across countries. Short-term smoothing without level targeting does not interfere with monetary policies aimed at price stability.

Evolution of Exchange Rate Behavior in the ASEAN-5 Countries

Agnes Isnawangsih

Ms.Longmei Zhang

The global financial crisis originated in advanced economies, but had a major impact on emerging markets. The impact, however, was not uniform. Even in a relatively homogenous group of countries such as ASEAN-4 (Indonesia, Malaysia, the Philippines and Thailand), there were considerable differences both in terms of instantaneous impact of the crisis and in terms of output performance relative to trend. There are several main reasons for the divergence. First, trade shocks had a larger impact on more open economies (Malaysia and Thailand). Second, countercyclical fiscal stimulus in Indonesia and the Philippines was larger and was sustained longer. Third, idiosyncratic factors pushed output up in Indonesia and down in Thailand. Such factors include investment-friendly structural reforms and fortuitously timed election spending in Indonesia, as well as political instability and natural disasters in Thailand.

Mr.Vladimir Klyuev

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