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Assessing the Economic Preconditions for a Yen Bloc

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  • Gary Madden
  • Scott Savage
  • Andrew McDonald

Abstract

Stabilising Asia‐Pacific exchange rates by establishing a system of pegs, bands or target zones around the Japanese yen requires the compromise of domestic policy autonomy. The cost of doing so is least when members reaction to economic shocks are symmetric. This study considers which currencies meet this necessary precondition. To assess regional disturbance symmetry the Blanchard and Quah (1989) procedure is employed to distinguish temporary from permanent shocks for paired aggregate output and price time‐series. Disturbance correlations between Japan and other Asia‐Pacific nations are calculated. Supply‐side disturbance correlations are relatively weak and suggest the economic preconditions for a yen bloc are not in place.

Suggested Citation

  • Gary Madden & Scott Savage & Andrew McDonald, 2000. "Assessing the Economic Preconditions for a Yen Bloc," Australian Economic Papers, Wiley Blackwell, vol. 39(1), pages 25-32, March.
    • Handle: RePEc:bla:ausecp:v:39:y:2000:i:1:p:25-32
    DOI: 10.1111/1467-8454.00072
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    Cited by:

    1. Jarko Fidrmuc & Iikka Korhonen, 2018. "Meta‐Analysis of Chinese Business Cycle Correlation," Pacific Economic Review, Wiley Blackwell, vol. 23(3), pages 385-410, August.
    2. Kocenda, Evzen & Hanousek, Jan & Engelmann, Dirk, 2008. "Currencies, competition, and clans," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 1115-1132.

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