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A VAR Analysis of US and Japanese Effects on Malaysian Aggregate and Sectoral Output

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  • Ibrahim, M.H

Abstract

The paper analyzes the relative influences of US, Japanese and domestic disturbances on domestic fluctuations for the case of Malaysia. Utilizing VAR framework and quarterly data from 1978 to 1999, we focus on their influences on aggregate fluctuations as well as on sectoral cycles. Our results suggest that aggregate and sectoral output fluctuations originate principally from domestic sources. However, the importance of the US and Japanese business cycles can not be ignored as they exert quite substantial influences on domestic output variability. Comparatively, the Japanese influences seem to be larger. However, from sectoral perspectives, there are disparities in the responses of sectoral output to US and Japanese disturbances. While some sectors are affected more by disturbances in Japan, other sectors seem to be more vulnerable to the US shocks. From a policy point of view, policy designs that ensure predictable domestic macroeconomic environment are most important and they need to be aligned more to those of Japan for curbing output variability. Which sectors should be given focus, however, depends crucially on the sources of disturbances.

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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies .

Volume (Year): 1 (2004)
Issue (Month): 1 ()
Pages: 5-28

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Handle: RePEc:eaa:ijaeqs:v:1:y2004:i:1_1

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Related research

Keywords: International Business Cycle Transmissions; Malaysia; Sectoral Output; VAR Analysis;

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  1. Yin-Wong Cheung, 2001. "Hong Kong Output Dynamics: An Empirical Analysis," CESifo Working Paper Series 482, CESifo Group Munich.
  2. Selover, David D., 1999. "International Interdependence and Business Cycle Transmission in ASEAN," Journal of the Japanese and International Economies, Elsevier, vol. 13(3), pages 230-253, September.
  3. Phylaktis, Kate, 1997. "Capital market integration in the Pacific-Basin region: An analysis of real interest rate linkages," Pacific-Basin Finance Journal, Elsevier, vol. 5(2), pages 195-213, June.
  4. de Roos, Nicolas & Russell, Bill, 2000. "An Empirical Note on the Influence of the US Stock Market on Australian Economic Activity," Australian Economic Papers, Wiley Blackwell, vol. 39(3), pages 291-300, September.
  5. Sheng, Hsiao-Ching & Tu, Anthony H., 2000. "A study of cointegration and variance decomposition among national equity indices before and during the period of the Asian financial crisis," Journal of Multinational Financial Management, Elsevier, vol. 10(3-4), pages 345-365, December.
  6. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  8. Cha, Baekin & Oh, Sekyung, 2000. "The relationship between developed equity markets and the Pacific Basin's emerging equity markets," International Review of Economics & Finance, Elsevier, vol. 9(4), pages 299-322, October.
  9. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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