Synchronized Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate
AbstractBecause many authors have proposed stimulating the ailing Japanese economy by monetary expansion and yen depreciation, we explore the repercussions of depreciating the yen against the dollar on the other East Asian economies¡Xwhich largely peg to the dollar. Since 1980, economic integration among Japan¡¦s neighbors¡XChina, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, and Thailand¡Xhas intensified and (except for China) their business cycles have been highly synchronized. These cycles have been closely linked to fluctuations in the yen/dollar exchange rate¡Xthrough changes in their export competitiveness and inflows of foreign direct investment. We show that a major yen devaluation would have a negative impact on incomes in other East Asian economies and that it is not a sensible policy option for Japan.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 022003.
Length: 23 pages
Date of creation: Jan 2003
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Other versions of this item:
- Ronald McKinnon & Gunther Schnabl, 2003. "Synchronised Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate," The World Economy, Wiley Blackwell, vol. 26(8), pages 1067-1088, 08.
- F15 - International Economics - - Trade - - - Economic Integration
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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