The Yen's Influence To The Exchange Rate System In East Asia

This text starts from the traditional "flying geese model" to elaborate the growing integration of economics in East Asia. After Plaza Accord was signed, the Japanese economy is pivotal to the economy in East Asia. The text highlighted Japanese's ratio in regional trade and foreign direct investment.Since Japanese economy influences the business cycles of East Asian countries, studies to the fluctuation of Yen/Dollar exchange rate as well as its influence to East Asian exchange rates are significant. Because this article launches the research from the angle of multilateral trade, we use long-term Purchasing Power Parity to measure exchange rate. From the collapse of Breton Forest System till now, Yen/Dollar exchange rate conforms to the long-term Purchasing Power Parity theory. Through the evaluation of long-term Purchasing Power Parity, we discover the phenomenon of "Over Shooting" in the fluctuation of Yen/Dollar exchange rate. For example, during the time which theoretically needs to revalue there are often overestimations; after...