This study investigates the requirement for the exchange rate to be a shock absorber in Indonesia and Thailand from 1986 to 2007. In general we find that the economic shocks have predominantly been asymmetric relative to the US and the Japanese economies. Yet the weights attached to the US dollar remain respectably high in the exchange rate management of the rupiah and the baht in particular for the latter currency during the post-1997 crisis. Hence relinquishing the role of the exchange rate as a shock absorber has been costly during both the pre-and the post-1997 crisis periods for these Southeast Asian countries. Furthermore it is arguably more costly for Thailand during the post-1997 and for Indonesia during the pre-1997 crisis
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