Have exchange rate regimes in Asia become more flexible post crisis? Re-visiting the evidence

Abstract

There is a broad consensus that the soft US dollar pegs operated by a number of Asian countries prior to 1997 contributed to the regional financial crisis of 1997-98. There is, however, much less agreement on the types of exchange rate regimes operated by many Asian countries since the crisis. Can they still be characterized as soft US dollar pegs, or have they become genuinely more flexible? This paper revisits the evidence regarding the extent of exchange rate flexibility in the five Asian countries (Indonesia, Korea, Malaysia, the Philippines and Thailand) using alternative methodologies and data spanning the pre- and post-crisis time period. Given the diversity of measures of de facto regimes in the literature, the use of alternative methodologies in this paper is critical as a means of obtaining an accurate and robust indication of the type of exchange rate regime operated by a country.