Economic models show China yuan shift, Malaysia–Singapore reactions, were best options

Summary: The People’s Republic of China’s gradual shift from a currency policy pegged to the US dollar to one that tracks the movements of a range of currencies was the correct choice given the challenges, and neighbors Malaysia and Singapore were best served by reacting in a similar way. That’s the conclusion of research presented in Global Shocks and the New Global and Regional Financial Architecture, Asian Perspectives, a new book by the Asian Development Bank Institute. The vulnerability of the currency regimes used in Asia came into focus after the Asian financial crisis of 1997–1998, when the many Asian countries that had pegged their currencies to the US dollar found they had opened themselves to significant economic and financial risks. Since the crisis, countries have either chosen to let their currencies trade more freely against the dollar—Indonesia, Thailand, and the Republic of Korea, for example—or shifted to other methods that still retain significant control over the value of their currencies. One of the most popular of these is the basket peg, where the local currency moves in a range against a basket of currencies, rather than being pegged directly to the moves of a single one. Read the transcript https://bit.ly/2vrdKcH Read the book https://www.adb.org/publications/global-shocks-and-new-global-and-regional-financial-architecture-asian-perspectives Read the related blog post https://bit.ly/2Mv6cjP About the authors Naoyuki Yoshino the dean of the Asian Development Bank Institute. Tamon Asonuma is an economist in the Research Department of the International Monetary Fund. Peter Morgan is a co-head of research at ADBI. Know more about ADBI’s work on currency policy https://bit.ly/2LPB3r3 https://bit.ly/2LQpGiI