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We investigate fluctuations in the nominal effective exchange rates (NEERs) of East Asian currencies and the Asian monetary unit (AMU), which is computed as a weighted average of East Asian currencies during the global financial crisis. We find that NEERs were more stable for countries that continued to follow a currency basket system during the global financial crisis.

Furthermore, we investigate the relationships among NEERs, AMU, and AMU deviation indicators, which indicate the extent of the deviation in the exchange rate of each East Asian currency from a benchmark rate given in terms of the AMU. By comparing NEERs with a combination of AMU and AMU deviation indicators, we find that there is a strong relationship between them, both before and after the global financial crisis. These results indicate that a coordinated exchange rate policy aimed at stabilizing the AMU deviation indicators will be effective in stabilizing the NEERs of East Asian currencies. In this respect, the AMU deviation indicators, which indicate intraregional exchange rates among East Asian currencies, play a crucial role.

Because NEER trade weights are widely similar among East Asian currencies, a policy aimed at stabilizing a home currency against its NEER may lead to a coordinated exchange rate policy without a common consensus among East Asian countries. In the future, however, coordinated monetary policies should be considered along with coordinated exchange rate policies.

This study focuses on Egypt’s recent experience with exchange rate policies, examining the existence of spillover effects of exchange rate variations on stock prices across two different de facto regimes and whether these effects, if any, are asymmetric.

The empirical analysis is carried out using a nonlinear autoregressive distributed lag modeling framework, which permits testing for the presence of short- and long-run asymmetries. Relevant local and global factors are also included in the analysis as control variables. The authors divide the entire sample into a soft peg period and a free float one.

Over the soft peg regime period, both positive and negative changes in EGP/USD exchange rates seem to have a significant impact on stock returns, whether in the short or long run. Short-term asymmetric effects vanish in the free float period, while long-term asymmetries continue to exist. By and large, the authors find that currency depreciation tends to exercise a stronger influence on stock returns than does currency appreciation.

The results offer important insights for investors, regulators and policymakers. With the domestic currency depreciation having a negative impact on stock prices, investors should contemplate implementing appropriate currency hedging strategies to abate depreciation risks and, hence, preserve their expected rate of return on the Egyptian pound-denominated investments. In the current post-flotation era, the government could pursue a flexible inflation targeting monetary policy framework, with a view to both lowering the soaring inflation toward an announced target rate and stabilizing economic growth. The Central Bank of Egypt (CBE) could adopt indirect monetary policy instruments to secure tightened liquidity conditions. Besides, the CBE could raise policy rates to incentivize people to keep their money in local currency-denominated instruments, instead of dollarizing their savings, thereby relieving banks of foreign currency demand pressures. Nevertheless, while being beneficial to the country’s real economy on several aspects, such contractionary monetary measures may temporarily impinge on stock market performance. Accordingly, policymakers should consider precautionary measures that reduce the potential for price distortions and unnecessary volatility in the stock market.

To the best of the authors’ knowledge, the current study represents the first attempt to explore the potential impact of exchange rate changes under different regimes on Egypt’s stock market, thus contributing to the relevant research in this area.

This chapter deals with the estimation of the effect of exchange rate flexibility on financial account openness. The purpose of our analysis is twofold: On the one hand, we try to quantify the differences in the estimated parameters when exchange rate flexibility is treated as an exogenous regressor. On the other hand, we try to identify how two different degrees of exchange rate flexibility (intermediate vs floating regimes) affect the propensity of opening the financial account. We argue that a simultaneous determination of exchange rate and financial account policies must be acknowledged in order to obtain reliable estimates of their interaction and determinants. Using a panel data set of advanced countries and emerging markets, a trivariate probit model is estimated via a maximum simulated likelihood approach. In line with the monetary policy trilemma, our results show that countries switching from an intermediate regime to a floating arrangement are more likely to remove capital controls. In addition, the estimated coefficients exhibit important differences when exchange rate flexibility is treated as an exogenous regressor relative to the case when it is treated as endogenous.

An impassioned debate has been on in the academic and policy circles regarding the undervaluation of the renminbi (RMB) yuan. This issue has emerged as one of the most contentious and thought‐provoking in the discipline of international finance. That it is undervalued is widely acknowledged. With China's emergence as an economic superpower of the future, this debate no doubt has considerable merit and ramifications. This article looks sang froid at its undervaluation, 2005 revaluation and when should the RMB yuan be further appreciated. As the Chinese economy picks up further growth momentum, the currency appreciation is expected to accelerate. This article also examines the implications of further appreciation of the RMB yuan on the Chinese and Asian economies as well as its plausible impact over the bilateral imbalances between China and US economy.

Exchange rate regime decisively impacts key policy objectives such as financial stability, inflation control, etc. The purpose of this paper is to overview the evolution of exchange rate regimes spanning 12 nations in the Latin American region over the last two decades and estimate the degrees of influence of other major currencies on each nation.

Using the methodology developed by Frankel and Wei, the de facto extent of exchange rate flexibility is discerned for these nations and put into perspective with that of the IMF exchange rate regime classifications.

An increase in flexibility is found from the 1990s to the 2000s, especially for inflation targeting nations. However, the results reveal these nations adopt a policy of “guarded caution” and follow more of a de facto managed floating regime that is far from pure floats. The smaller economies of the region still pursue more fixed regimes. While the results correlate, to an extent, with the IMF's classifications, several areas of discrepancy are noted. The findings are robust to several sensitivity analyses.

A discrepancy between the IMF regime categorization and the true regime a country actually follows may cause IMF financial assistance programs to be less effective. Do countries follow regimes they are classified into? The present study gleans deeper into the issue and discerns this. The comparative analysis includes the relatively larger economies of the region as well as the seldom researched smaller ones.

The purpose of this chapter is to explore the possible relation between public policy measures, particularly relating to currency exchange rates, capital flow mechanisms and cross-border insolvency by describing the current state of insolvency regulation in Latin America and some cases that exemplify this public-private dynamic.

The first part of the chapter is based on literature review and content analysis to show the current situation of the regulation of insolvency in Latin America and the evolution of policies shaping the flow of capital and the exchange rates. The second part illustrates the proceedings in selected countries, particularly for Colombia and Venezuela.

The analysis led to the finding that some countries’ policy mechanisms such as in the case of Venezuela might lead to a problem regarding national companies involved in an insolvency proceeding, particularly when the company alleges that public policy in force have changed circumstances leading to the impossibility of paying foreign-located liabilities.

The chapter is based largely on literature review and available data, public legal documents and cases relating public policy and cross-border insolvency; however, insolvency proceedings are not of public domain; thus, there is a large amount of information related with the mentioned cases that remain undisclosed.

This chapter provides a theoretical and practical perspective to analyze cross-border insolvency from a local regulatory framework. It also demonstrates the possible link between public policy and cross-border insolvency.

This report examines the recent developments and trends relating to the Chinese government’s policy actions and the key issues that determine the choice of exchange rate regime in China. An up-to-date “stock-take” of the economic indicators is conducted to determine what is suitable for China in light of the rapidly evolving nature of the world economy and trading environment. This paper discusses the role of economic development, trade competitiveness, capital flow, foreign exchange reserve, and RMB internationalization in the determination of the RMB exchange rate regime.

This research uses an inductive approach to gain a fine-grained understanding of the complex, multifaceted aspects of China’s exchange rate policy. A combination of statistical analysis, including basic descriptive statistics, trend analysis, and a correlation study are used to explore the association between various indicators and their implications. The report also draws on analysis of a broad range of data sources and the work of numerous researchers and research institutions.

A more flexible exchange rate regime can play a complementary role towards rebalancing the Chinese economy by raising the buying capacity of families, rebalancing growth towards domestic consumption, and reducing reliance on export. China’s price elasticity of the demand for exports was relatively low that the appreciation of the Chinese currency has almost no influence on optimizing China’s trade balance. A more flexible two-way flow in RMB would be suitable under the current cash flow scenario in China. Reduced intervention will facilitate further adjustment in reserves. Lastly, in the early stage of RMB internationalization, flexibility in the exchange rate is one of the factors that influences its growth prospect as a reserve currency.

The findings and conclusion are derived based on the latest empirical information, statistical evidence, and economic theory. This inquiry does not build on a theory, and aims to neither verify a theory, nor test hypotheses. Rather, it aims to demonstrate, assess, and explain significant roles that various economic factors play in shaping the future exchange rate regime of China.

This paper presents the rationale behind a more flexible two-way exchange rate, by assessing the latest empirical data and theoretical explanation that support such a move.

The authors make assessment on RMB valuation and to contribute to the fierce debate on this important issue, which is perceived to have a great effect on the improvement or deterioration in trade balance. A triangular analysis approach is put forward and empirical assessment is made. The paper aims to discuss these issues.

A triangular analysis approach based on no arbitrage conditions for three currencies, and causality and influence analysis.

First, it has been found that the movements in the RMB dollar exchange rate do influence the dollar euro exchange rate and the former do have a causality effect on the latter, in both the long run and the short term. Second, it is implied that the RMB is overvalued vis-à-vis the US dollar, as the analysis suggests that an overvalued euro vis-à-vis the US dollar would imply a kind of overvaluation of the RMB vis-à-vis the US dollar, and by any conventional measures the euro has appeared to be overvalued vis-à-vis the US dollar, especially in the months before the last financial crisis.

First, the peg of the RMB to the US dollar that undervalues the RMB vis-à-vis the US dollar will not help promote China's overall trade balance or export even if undervaluation of currencies can ever help improve nations' terms of trade. Second, no stability in RMB exchange rates can be claimed by pegging the RMB to the US dollar, as the exchange rate of the RMB vis-à-vis currencies other than the US dollar would be as volatile as that between the US dollar and the euro and other convertible currencies.

A new triangular analysis approach in international finance research. First, there is an advantage to adopt this seemingly simple analytical framework: it is highly reliable; no triangular arbitrage conditions have to be met even under exchange controls, whilst PPP may not hold even with flexible exchange rate regimes. Second, it does away with the thinking confined to small open economies that has dominated academic research for so long and is totally inapplicable to the RMB case.

Financial globalization and global imbalances are two facets of the same phenomenon, which has resulted in the worst global economic and financial crisis since the Great Depression. The purpose of this paper is to analyze the complex interaction of several mutually reinforcing trends and factors – the global monetary easing of 2001‐2004, financial innovation, regulatory failure, in particular in the USA and the UK, US fiscal indiscipline and Chinese currency manipulation – that contributed to the global financial crisis. The key to a return to global financial buoyancy will be the coordinated resolution of the global imbalances over the medium term, as well as the establishment of a strong global financial regulatory framework focusing on both macro‐ and micro‐financial risks.

In the paper, the author analyzes the role of the interaction of financial innovation, regulatory and global imbalances in the creation of the real estate bubble, shadow banking and the eventual collpase of what the author dubbed the Banking 2.0 structure (1980s).

The main findings are that these factors contributed to a flattening of the yield curve in 2004‐2006 despite the tightening of monetary policy and growing US fiscal deficits. Moreover, while the US dollar is on a long‐term weakening trend, the lack of alternatives means that it will maintain its role as a reserve currency.

This paper focuses on the role of the global imbalances in triggering the financial crisis and shaping the role of the dollar in the post‐crisis world.