Asymmetric responses of East Asian currencies to the US dollar depreciation for reducing the US current account deficits

In this paper, we investigate responses of East Asian currencies to the US dollar depreciation in the near future. First, we show that a significant depreciation of the US dollar will be necessary in order to reduce the current account deficits. Second, we show that the responses of the East Asian currencies to a sudden and sharp depreciation of the US dollar will differ with countries because of the different degree of linkages of the East Asian currencies to the US dollar. Based on the above analyses, a regional coordination of the exchange rate policy is necessary to the East Asian countries to response appropriately to a possible depreciation of the US dollar in the near future.