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Revisiting the shocking aspects of Asian monetary unification

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  • Genberg, Hans
  • Siklos, Pierre L.

Abstract

There is renewed interest in monetary cooperation in Asia. To the extent that such cooperation evolves to include discussions about co-ordination of exchange rate policies it is important to evaluate the desirability of such co-ordination. Such an evaluation involves in part an assessment of the cross-country correlation of macro-economic shocks, a criterion used in the past to assess the desirability of monetary unification. In revisiting this question this paper not only updates previous studies, but it makes two significant methodological contributions to the literature based on estimates of vector autoregression (VAR) models. Our empirical specification allows for the possibility that aggregate demand and aggregate supply shocks are contemporaneously correlated within each economy, on the one hand, and takes explicit account of third-country common influences on each economy, on the other. Our results show that previous findings in the literature do not always hold up when our modelling methodology is applied to the data. With respect to the implications for monetary unification our results do not clearly identify a group of countries for which shocks are unambiguously highly correlated and which therefore would be able to perform well with a common monetary policy. The correlation structure differs between aggregate demand shocks and aggregate supply shocks.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 21 (2010)
Issue (Month): 5 (October)
Pages: 445-455

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Handle: RePEc:eee:asieco:v:21:y:2010:i:5:p:445-455

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Web page: http://www.elsevier.com/locate/asieco

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Keywords: Asian monetary unification Correlation of shocks VAR;

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References

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Citations

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Cited by:
  1. Gilles de Truchis & Benjamin Keddad, 2012. "South East Asian Monetary Integration: New Evidences from Fractional Cointegration of Real Exchange Rates," AMSE Working Papers 1229, Aix-Marseille School of Economics, Marseille, France, revised 05 Nov 2012.
  2. Hideaki Hirata & M. Ayhan Kose & Chris Otrok, . "Regionalization vs. Globalization," Working Paper 164456, Harvard University OpenScholar.
  3. Dong He & Wei Liao, 2012. "Asian Business Cycle Synchronization," Pacific Economic Review, Wiley Blackwell, vol. 17(1), pages 106-135, 02.
  4. Emilio Espino & Julian Kozlowski & Juan M. Sánchez, 2013. "Regionalization vs. globalization," Working Papers 2013-002, Federal Reserve Bank of St. Louis.
  5. Bashar, Omar H.M.N., 2012. "The dynamics of aggregate demand and supply shocks in ASEAN countries," Journal of Asian Economics, Elsevier, vol. 23(5), pages 507-518.
  6. Hamilton-Hart, Natasha, 2011. "Distribution, Domestic Politics and Monetary Cooperation in East Asia," ADBI Working Papers 332, Asian Development Bank Institute.

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