The study of exchange rate variability and pressures for Asian currency unit

This study considers the early warning system and adopts the fixed and random effects models to analyze both the exchange rate variability and pressures of the Asian currency unit (ACU) between March 2, 1992 and December 30, 2008. Results revealed that exchange rate variability has a significant relationship with the estimated ratio of M2 to foreign reserves, banking sector fragility, and foreign reserves growth rate. In the regression of exchange rate pressure, the ratio of balance on current account to gross domestic product and the industrial production index growth rate has been proven to exhibit a significant relationship. Regarding the ACU framework, this study revealed that stabilization of banks, international trade, and money supplies are the main factors to prevent financial crises. Therefore, this study provides a reference to integrate Asian countries into an economic alliance and establish an international trade system.