Identifying Shocks in Regionally Integrated East Asian Economies with Structural VAR and Block Exogeneity
AbstractIn this paper we use a structural VAR model with block exogeneity to investigate if external shocks originating from the USA played a dominant role in influencing the macroeconomic fluctuations in East Asia during the period 1978-2007. The empirical results show a dynamic effect of external shocks, implying that, even though regional integration appears to be deepening and accelerating, especially after the recent global financial crisis, the influence of US shocks on real output fluctuations in the East Asian region is still very strong. The effects of Chinese shocks show an increasing trend over time, but the impacts are still small and not comparable with those of US shocks. The world oil price shock has become increasingly important in influencing the stability of real output growth in the region. The results from variance decomposition and impulse response analysis confirm the findings. Even though Japanese firms have established production networks in East Asia through trade and investment, and China has also grown rapidly and become a key regional country, the results suggest that US influence in the region is still asymmetric and strong. Therefore, it is difficult to conclude that shocks to the East Asian economies have become more regionally oriented.
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Bibliographic InfoPaper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 10/23.
Length: 23 pages
Date of creation: 01 May 2010
Date of revision:
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Structural vector autoregression; Block exogeneity; Monetary union; External shocks; East Asia;
Other versions of this item:
- Sato, Kiyotaka & Zhang, Zhaoyong & McAleer, Michael, 2011. "Identifying shocks in regionally integrated East Asian economies with structural VAR and block exogeneity," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 81(7), pages 1353-1364.
- Kiyotaka Sato & Zhaoyong Zhang & Michael McAleer, 2009. "Identifying Shocks in Regionally Integrated East Asian Economies with Structural VAR and Block Exogeneity," CIRJE F-Series CIRJE-F-694, CIRJE, Faculty of Economics, University of Tokyo.
- Sato, K. & Zhang, Z. & McAleer, M.J., 2010. "Identifying Shocks in Regionally Integrated East Asian Economies with Structural VAR and Block Exogeneity," Econometric Institute Research Papers EI 2010-09, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Sato, K. & Zhang, Z. & McAleer, M.J., 2009. "Identifying Shocks in Regionally Integrated East Asian Economies with Structural VaR and Block Exogeneity," Econometric Institute Research Papers EI 2009-49, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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