COINTEGRATION AMONG ASIAN CURRENCIES - EVIDENCE OF THE INCREASING INFLUENCE OF THE JAPANESE YEN

This is a study of the stochastic properties of Asian exchange rates a nd of cointegration between the Japanese yen and two sets of Asian cur rencies, i.e., currencies of the 'Tigers', Hong Kong, South Korea, Sin gapore, and Taiwan; and currencies of the ASEANs, Malaysia, Philippine s, Thailand, and Singapore. Using a longer time horizon than other coi ntegration studies and accounting for deviations from normality, nonst ationarity, and the presence of unit roots, it is documented that (in contrast to the findings for the major currencies) both sets of Asian currencies are found to be cointegrated, with the influence of the Jap anese yen increasing relative to the US dollar in recent years. This e vidence of cointegration between the Yen and other Asian currencies ha s important implications for understanding Asian financial integration , the increasing international role of the Japanese yen, and for devel oping asset allocation and cross-hedging strategies for investments de nominated in these Asian currencies.