Yen-synchronization of floating East Asian currencies: A regime-switching regression model and micro-structural analysis

Abstract

Kim, Bong-Han, Min, Hong-Ghi, McDonald, Judy, and Hwang, Young-Soon-Yen-synchronization of floating East Asian currencies: A regime-switching regression model and micro-structural analysis Using a regime-switching regression model, we find evidence of synchronization between the Swiss-franc exchange rates of floating East Asian currencies and the Swiss-franc-Japanese-yen exchange rate over the period 1999-2006. The volatility of Swiss-franc-East-Asian currencies' exchange rates is higher during the synchronization period than during the de-synchronization period. Contrary to traditional arguments concerning the yen-bloc, we find that the Export-Similarity Index and Foreign Portfolio Investment between Japan and East Asian countries are the two main determinants of yen-synchronization in the region. Finally, microstructural analysis shows that the weeks of synchronization is greater when the yen is strong for Korea and Taiwan, but there are no asymmetric responses for Thailand. Indonesia, or the Philippines. J. Japanese Int. Economies 26 (2) (2012) 221-232. Department of International Economics, Kongju National University, Kongju, Chung-Nam, Republic of Korea; Department of Management Science, Korea Advanced Institute of Science and Technology, Daejun, Republic of Korea; Department of Economics, Lehigh University, Bethlehem, PA 18015, United States; Busan Development Institute, Busan, Republic of Korea. Crown Copyright (C) 2012 Published by Elsevier Inc. All rights reserved.