A New Approach to the Estimation of Equilibrium Exchange Rates Among East-Asian Economies

Following the debate on exchange rate stabilization within the ASEAN 3, this paper presents a new approach to the determination of real equilibrium exchange rates in the region based on a general equilibrium approach. Based on the real bilateral export and import flows across the region, this methodological approach computes simultaneously all real exchange rates of single member countries. Numerical simulations are conducted for illustration, based on trade and price data and on several alternative assumptions on bilateral price elasticities. While the methodology can further benefit from empirical estimation of bilateral elasticities, it may already provide helpful elements for an assessment of the relevance of intra-regional trade imbalances, and of the associated deviations of real exchange rates from their equilibrium values