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Measuring the Economic Impact of Monetary Union: The Case of Okinawa

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Author Info
Shinji Takagi () (Independent Evaluation Office, International Monetary Fund, Washington, D.C.)
Mototsugu Shintani () (Department of Economics, Vanderbilt University)
Tetsuro Okamoto () (Faculty of Economics, Osaka Sangyo University)

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Abstract

Data from Okinawa's monetary union with the United States in 1958 and with Japan in 1972 are used to obtain a quantitative indication of how monetary union might affect the behavior of nominal and real shocks across two economies. With monetary union, the variance of the real exchange rate between two economies declines, and their business cycle linkage becomes stronger. A VAR analysis of output and price data for Okinawa and Japan further indicates that the contribution of asymmetric nominal shocks in business cycles becomes smaller. Monetary union thus seems to facilitate both nominal and real convergence.

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File URL: http://www.vanderbilt.edu/Econ/wparchive/workpaper/vu03-w15.pdf
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File Function: First version, 2003
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Paper provided by Department of Economics, Vanderbilt University in its series Working Papers with number 0315.

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Date of creation: Jul 2003
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Handle: RePEc:van:wpaper:0315

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Related research
Keywords: Currency union; foreign exchange rates; Japanese economy; price convergence; San Francisco Peace Treaty; vector autoregressions;

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Find related papers by JEL classification:
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
F15 - International Economics - - Trade - - - Economic Integration
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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