AMU and AMU Deviation Indicators for East Asian Currencies

“AMU (Asian Monetary Unit) and AMU Deviation Indicators” are calculated by Eiji Ogawa, Faculty Fellow of RIETI and Professor of Graduate School of Commerce and Management at Hitotsubashi University and Junko Shimizu, Associate Professor of School of Commerce at Senshu University, as a part of the Project on “The Optimal Exchange Rate Regime for East ” headed by Takatoshi Ito, Faculty Fellow of RIETI and Professor of Economics at the University of Tokyo. The AMU is jointly organized by RIETI and Global COE project “Research Unit for Statistical and Empirical Analysis in Social Sciences” of Hitotsubashi University.

The monetary authorities of East Asian countries have been surveillance capabilities. The AMU is calculated as a strengthening their regional monetary cooperation since the weighted average of East Asian currencies according to the Asian currency crisis of 1997. This monetary cooperation method used to calculate the (ECU) after the crisis resulted in the (CMI), adopted by EU countries under the European Monetary which was established by the ASEAN + 3 (, South System (EMS) prior to the introduction of the . The Korea, and ) as a network of bilateral and multilateral AMU Deviation Indicators for each East Asian currency swap arrangements to deal with currency crises in member are measured to show the degree of deviation from the countries. Under the CMI, the monetary authorities conduct Benchmark Rate for each of the East Asian currencies in surveillance to prevent currency crises in the future. terms of the AMU.

As one of the new surveillance criteria, RIETI research On the RIETI website*, Nominal AMU Deviation Indicators project “The Optimal Exchange Rate Regime for East Asia" on a daily basis and Real AMU Deviation Indicators, which proposes to develop an Asian Monetary Unit (AMU) and are adjusted for differences in infl ation, on a monthly basis AMU Deviation Indicators for East Asian currencies. These are provided. should contribute to coordinated exchange rate policies *http://www.rieti.go.jp/users/amu/en/index.html in East Asia, thereby enhancing the monetary authorities'

Figure 1. Nominal AMU Deviation Indicators Figure 2. Real AMU Deviation Indicators (benchmark year=2000/2001, basket weight=2004-2006, daily) (benchmark year=2000/2001, basket weight=2004-2006, monthly)

Brunei Darussalam China P.R. Cambodia China P.R. Indonesia Japan Japan South Korea Laos Malaysia Philippines Singapore Thailand Vietnam (%) (%) 50 60

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-40 -40 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Aug-04 Dec-04 Aug-05 Dec-05 Aug-06 Dec-06 Aug-07 Dec-07 Aug-08 Dec-08 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08

32 RIETI Highlight 2009 Special Edition AMU-cmi and its Deviation Indicators become available on our website!

Following the agreement on the Chiang Mai Initiative Figure 3. Nominal AMU-cmi Deviation Indicators Multilateralization (CMIM) on May 3, 2009 in Bali, Indonesia, (benchmark year=2000/2001, basket weight=2009, daily) which was to raise the amount of the CMIM from $80 billion Darussalam Cambodia China P.R. Hong Kong Indonesia Japan South Korea Laos to $120 billion and to strengthen the regional surveillance (%) Malaysia Myanmar Philippines Singapore Thailand Vietnam mechanism for monitoring the regional and global economic 40 situation, the Project developed a new currency unit called the 30

“AMU-cmi” and its Deviation Indicators. 20

10 The characteristics of the AMU-cmi are as follows: 1. The basket share of AMU-cmi is based on the individual 0

country’s contribution proportion of CMIM. -10 2. The Hong Kong dollar participates in the composition -20 currencies of AMU-cmi. -30

For more information please visit -40 http://www.rieti.go.jp/users/amu/en/index.html. Jul-09 Jul-08 Jul-07 Jul-06 Jul-05 Jan-09 Jan-08 Jan-07 Jan-06 Jan-05 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05 Sep-08 Sep-07 Sep-06 Sep-05 Sep-04 Nov-08 Nov-07 Nov-06 Nov-05 Nov-04 May-09 May-08 May-07 May-06 May-05 The results are available from September 1, 2009.

Forthcoming Publication

Research results of FTA study group, headed by Professor Shujiro Urata, Faculty Fellow of RIETI, will be published from World Scientifi c Publishing in fall 2009.

Book Title: Free Trade Agreements in The Asia Pacifi c Edited by: Shujiro Urata (RIETI/Waseda University) and Christopher Findlay (University of Adelaide) Price: US$95

Table of Contents Chapter 1 An Analysis of the Restrictions on Foreign Direct Investment in Free Trade Agreements (S Urata & J Sasuya) Chapter 2 Assessing the Economic Impacts of Free Trade Agreements: A Computable Equilibrium Approach (K Abe) Chapter 3 Impacts of Japanese FTAs/EPAs: Post-Evaluation from Initial Data (M Ando) Chapter 4 Market Access in FTAs: Assessment Based on Rules of Origin and Agricultural Trade Liberalization (I Cheong & J Cho) Publisher’s comment Chapter 5 On the Comparison of Safeguard Mechanisms of Free Trade “Free Trade Agreements (FTAs) have proliferated in East Asia as regional Agreements (A Kotera & T Kitamura) economies rush to catch up with the rest of the world — but what difference do they make? This book answers that question by providing Chapter 6 Services in Free Trade Agreements (R Ochiai et al.) an up-to-date assessment of the quality and impact of FTAs in the region. Chapter 7 On the Use of FTAs by Japanese Firms Featuring a collection of papers originally written for the prestigious (K Takahashi & S Urata) Research Institute of Economy, Trade and Industry (RIETI) in Tokyo, it presents contemporary analysis and insights into the evolution of recent Chapter 8 Impacts of Free Trade Agreements on Trade Flows: FTAs. The book is suitable for use by trade policy negotiators, policy An Application of the Gravity Modeling Approach analysts, and people developing business strategies in organizations, as (S Urata & M Okabe) well as graduate students and researchers in the fi eld.”

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