Skip to main content

Research Repository

Advanced Search

Measuring currency pressures: the cases of the Japanese yen, the Chinese yuan, and the UK pound

Hall, Stephen G.; Kenjegaliev, Amangeldi; Swamy, P. A. V. B.; Tavlas, George S.

Authors

Stephen G. Hall

P. A. V. B. Swamy

George S. Tavlas



Abstract

We investigate bilateral currency pressures against the US dollar for three currencies: the Japanese yen, the Chinese yuan, and the UK pound during the period 2000:Q1 to 2009:Q4. We employ a model-based methodology to measure exchange market pressure over the period. Conversion factors required to estimate the pressure on these currencies are computed using a time-varying coefficient regression. We then use our measures of currency pressures to assess deviations of exchange rates from their market-equilibrium levels. For the yen, our measure of currency pressure suggests undervaluation during the initial part of our estimation period, a period during which the Bank of Japan sold yen in the foreign exchange market. We find persistent undervaluation of the yuan throughout the estimation period, with the undervaluation peaking at about 20% in 2004 and 2007. For the pound, the results indicate low pressure - suggesting a mainly free-floating currency - throughout the sample period. These results appear consistent with the policies pursued by the central banks of the currencies in question.

Citation

Hall, S. G., Kenjegaliev, A., Swamy, P. A. V. B., & Tavlas, G. S. (2013). Measuring currency pressures: the cases of the Japanese yen, the Chinese yuan, and the UK pound. Journal of the Japanese and International Economies, 29(September), 1-20. doi:10.1016/j.jjie.2013.04.001

Journal Article Type Article
Acceptance Date Jan 17, 2013
Online Publication Date May 16, 2013
Publication Date 2013-09
Publicly Available Date
Journal Journal of the Japanese and International Economies
Print ISSN 0889-1583
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 29
Issue September
Pages 1-20
DOI https://doi.org/10.1016/j.jjie.2013.04.001
Keywords Political Science and International Relations; Economics and Econometrics; Finance
Public URL https://hull-repository.worktribe.com/output/429269
Additional Information This article is maintained by: Elsevier; Article Title: Measuring currency pressures: The cases of the Japanese yen, the Chinese yuan, and the UK pound; Journal Title: Journal of the Japanese and International Economies; CrossRef DOI link to publisher maintained version: http://dx.doi.org/10.1016/j.jjie.2013.04.001; Content Type: article; Copyright: Copyright © 2013 Elsevier Inc. All rights reserved.