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Regional and Industry Cycles in Australasia: Implications for a Common Currency

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Author Info
Arthur Grimes () (Motu Economic and Public Policy Research)

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Abstract

If two countries experience similar cycles, loss in monetary sovereignty following currency union may not be severe. Analysis of cyclical similarity is frequently carried out at the overall industry level, then interpreted with reference to regional industrial structures. By contrast, this paper explicitly incorporates regional industry structure into an examination of Australasian cycles. Since 1991, NZ and Australasian cycles have been highly correlated, but there is little evidence that the NZ cycle has been "caused" by Australian regional or industry cycles. We test whether the NZDAUD exchange rate has insulated NZ from Australian shocks, but find it has not played a major buffering role in response to Australian industry shocks (including mining shocks). Instead, the strongest impacts on the NZDAUD stem from the NZ cycle. An important loss of monetary sovereignty under currency union may therefore arise in response to NZ-specific shocks.

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Paper provided by Motu Economic and Public Policy Research in its series Working Papers with number 05_04.

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Length: 42 pages
Date of creation: May 2005
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Handle: RePEc:mtu:wpaper:05_04

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Web page: http://www.motu.org.nz
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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Arthur Grimes & Andrew Aitken & Suzi Kerr, 2004. "House Price Efficiency: Expectations, Sales, Symmetry," Urban/Regional 0408001, EconWPA. [Downloadable!]
  2. Fabling, Richard & Grimes, Arthur, 2005. "Insolvency and economic development: Regional variation and adjustment," Journal of Economics and Business, Elsevier, vol. 57(4), pages 339-359. [Downloadable!] (restricted)
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  3. Suzi Kerr & Catherine Leining, 2003. "Joint Implementation in Climate Change Policy," Working Papers 03_04, Motu Economic and Public Policy Research. [Downloadable!]
  4. Haug, Alfred A, 2001. "Co-movement towards a Currency or Monetary Union? An Empirical Study for New Zealand," Australian Economic Papers, Blackwell Publishing, vol. 40(3), pages 307-17, September. [Downloadable!] (restricted)
  5. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November. [Downloadable!] (restricted)
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  6. Suzi Kerr, 2003. "Allocating Risks in a Domestic Greenhouse Gas Trading System," Others 0309003, EconWPA. [Downloadable!]
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  7. Dave Maré & Jason Timmins, 2003. "Moving to Jobs?," Labor and Demography 0309003, EconWPA. [Downloadable!]
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  8. Dr. Arthur Grimes, 2003. "Economic Growth and the Size and Structure of Government: Implications for New Zealand," Macroeconomics 0310016, EconWPA. [Downloadable!]
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  9. Suzi Kerr, 2003. "Efficient Contracts for Carbon Credits from Reforestation Projects," Working Papers 03_12, Motu Economic and Public Policy Research. [Downloadable!]
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  10. Robert A Buckle & Kunhong Kim & Nathan McLellan, 2003. "The impact of monetary policy on New Zealand business cycles and inflation variability," Treasury Working Paper Series 03/09, New Zealand Treasury. [Downloadable!]
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  11. Suzi Kerr & Susana Cardenas & Joanna Hendy, 2004. "Migration and the Environment in the Galapagos: An analysis of economic and policy incentives driving migration, potential impacts from migration control, and potential policies to reduce migration pr," Working Papers 03_17, Motu Economic and Public Policy Research. [Downloadable!]
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  12. Dixon, Robert & Shepherd, David, 2001. "Trends and Cycles in Australian State and Territory Unemployment Rates," The Economic Record, The Economic Society of Australia, vol. 77(238), pages 252-69, September. [Downloadable!] (restricted)
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  13. Viv. B Hall & McDermott C. John, 2004. "Regional Business Cycles in New Zealand: Do they exist? What might drive them?," ERSA conference papers ersa04p200, European Regional Science Association. [Downloadable!]
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  14. John Gibson, 2003. "Do Lower Expected Wage Benefits Explain Ethnic Gaps In Job- Related Training? Evidence From New Zealand," Labor and Demography 0310004, EconWPA. [Downloadable!]
  15. Arthur Grimes, 2005. "Intra & Inter-Regional Industry Shocks: A New Metric with an Application to Australasian Currency Union," Macroeconomics 0509019, EconWPA. [Downloadable!]
  16. Viv Hall & Angela Huang, 2003. "Would Adopting the US Dollar Have Led to Improved Inflation, Output and Trade Balances for New Zealand in the 1990s?," Working Papers 03_14, Motu Economic and Public Policy Research. [Downloadable!]
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  17. Russell Cooper & Hubert Kempf, 2004. "Overturning Mundell: Fiscal Policy in a Monetary Union," Review of Economic Studies, Blackwell Publishing, vol. 71(2), pages 371-396, 04. [Downloadable!] (restricted)
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  18. Michael A. Kouparitsas, 2001. "Is the United States an optimum currency area? an empirical analysis of regional business cycles," Working Paper Series WP-01-22, Federal Reserve Bank of Chicago. [Downloadable!]
  19. Suzie Ballantyne & Simon Chapple & David C. Maré & Jason Timmins, 2003. "Movements Into and Out of Child Poverty in New Zealand: Results from the Linked Income Supplement," Working Papers 03_13, Motu Economic and Public Policy Research. [Downloadable!]
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  20. Michel Beine & Serge Coulombe, 2003. "Regional Perspectives on Dollarization in Canada," Journal of Regional Science, Blackwell Publishing, vol. 43(3), pages 541-570. [Downloadable!] (restricted)
  21. NILS BJÖRKSTEN & ÖZER KARAGEDIKLI & CHRISTOPHER PLANTIER & ARTHUR GRIMES, 2004. "What Does the Taylor Rule Say About a New Zealand-Australia Currency Union?," The Economic Record, The Economic Society of Australia, vol. 80(s1), pages S34-S42, 09. [Downloadable!] (restricted)
  22. Suzi Kerr, 2003. "Indigenous Forests and Forest Sink Policy in New Zealand," Working Papers 03_15, Motu Economic and Public Policy Research. [Downloadable!]
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  23. Suzi Kerr, 2003. "Motu, Excellence in Economic Research and the Challenges of 'Human Dimensions' Research," Working Papers 03_05, Motu Economic and Public Policy Research. [Downloadable!]
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  24. John McMillan, 2005. "Quantifying Creative Destruction Entrepreneurship and Productivity in New Zealand," Industrial Organization 0509006, EconWPA. [Downloadable!]
  25. Nils Bjorksten, 2001. "The current state of New Zealand monetary union research," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 64, December. [Downloadable!]
  26. Suzi Kerr & Richard Newell & Jim Sanchirico, 2003. "Evaluating the New Zealand Individual Transferable Quota Market for Fisheries Management," Others 0309004, EconWPA. [Downloadable!]
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  27. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
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  28. Arthur Grimes & Suzi Kerr & Andrew Aitken, 2005. "Bi-Directional Impacts of Economic, Social and Environmental Changes and the New Zealand Housing Market," Urban/Regional 0509012, EconWPA. [Downloadable!]
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  29. David Hargreaves & C John McDermott, 1999. "Issues relating to optimal currency areas: theory and implications for New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, September. [Downloadable!]
  30. Suzi Kerr & Emma Brunton & Ralph Chapman, 2004. "Policy to Encourage Carbon Sequestration in Plantation Forests," Working Papers 04_05, Motu Economic and Public Policy Research. [Downloadable!]
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  31. Suzi Kerr & Shuguang Liu & Alexander S. P. Pfaff & R. Flint Hughes, 2003. "Carbon Dynamics and Land-Use Choices: Building a Regional-Scale Multidisciplinary Model," Working Papers 03_06, Motu Economic and Public Policy Research. [Downloadable!]
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  32. Arthur Grimes & Suzi Kerr & Andrew Aitken, 2003. "Housing and Economic Adjustment," Working Papers 03_09, Motu Economic and Public Policy Research. [Downloadable!]
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  33. Arthur Grimes, 2005. "New Zealand: A Typical Australasian Economy?," Economic History 0509004, EconWPA. [Downloadable!]
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  34. Arthur Grimes & Robert Sourell & Andrew Aitken, 2005. "Regional Variation in Rental Costs for Larger Households," Working Papers 05_02, Motu Economic and Public Policy Research. [Downloadable!]
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  35. Suzi Kerr & Andrew Aitken & Arthur Grimes, 2004. "Land Taxes and Revenue Needs as Communities Grow and Decline: Evidence from New Zealand," Working Papers 04_01, Motu Economic and Public Policy Research. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Viv B. Hall, 2005. "An Australasian Currency, New Zealand Adopting The Us Dollar, Or An Independent Monetary Policy?," CAMA Working Papers 2005-22, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
  2. Viv Hall & John McDermott, 2008. "An Unobserved Components Common Cycle For Australia? Implications For A Common Currency," CAMA Working Papers 2008-11, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
  3. Michelle Poland & David C Maré, 2005. "Defining Geographic Communities," Urban/Regional 0509016, EconWPA. [Downloadable!]
    Other versions:
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