Common Trend and Common Currency: Australiaand New Zealand
AbstractThis note empirically examines the existence of common trend between the bilateral real exchange rates of Australia and New Zealand with two of their major trading partners, Japan and the United States, as base countries. Results from Johansen cointegration analysis show that New Zealand and Australia bilateral real exchange rates with Japan as the base country share a common stochastic trend, which can be interpreted in terms of an optimum currency area. This no longer holds should the United States be selected as the base country. This might shed light on the impact of comparative advantage in the regional trade among Australia, New Zealand, and Japan in a liberalized environment.
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Bibliographic InfoArticle provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.
Volume (Year): 2 (2003)
Issue (Month): 2 (August)
common trend; optimum currency area; generalized PPP;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- F31 - International Economics - - International Finance - - - Foreign Exchange
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