Equilibrium Exchange Rates in Asian Currencies

In this paper, we measured the equilibrium exchange rates (EER) for Asian currencies (baht. new Taiwan dollar. won. yen. and yuan) and the U.S. dollar. We compared the equilibrium exchange rates reflecting economic fundamentals with the actual exchange rate, and examined which factors affect the movement of equilibrium exchange rates. Our study shows that rapid increases of labor productivity in Korea and China have prevented an excessive depreciation of the won and yuan. When we take multilateral trade into account, the effective exchange rate of the yen was undervalued compared with the effective equilibrium exchange rate in 2000.