The analysis of implications of alternative exchange rate regime has been one of the most important questions in international economics. In particular, an appropriate exchange rate regime for Asian countries has been a popular topic since the Asian currency crisis of 1997-98. Most of the empirical discussion on exchange rate regimes has used the de jure regime as compiled by the IMF, which is based on the regime the country declares to be running. However, many countries that adopt the de jure flexible rate intervene in foreign exchange markets so frequently. Their observable performances thus have very little difference from those of countries that have explicit fixed exchange rates. In my recent paper, I investigated what affected the post-crisis exchange rates of three ASEAN countries: Singapore, Thailand, and Malaysia. We examined how and when the ASEAN currencies changed their correlations with the U.S. dollar and the Japanese yen. We found significant structural breaks in the correlations during the time zone when East Asian market is open. In the post-crisis period, the first structural break happened when Malaysia adopted the fixed exchange rate and the second break happened when some East Asian countries introduced inflation targeting. The structural breaks suggested strong monetary and real linkages among the ASEAN countries.
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