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A structural VARX modelling of international parities between China and Japan in the liberalization era

Author

Listed:
  • Tze-Haw Chan

    (School of Management, Universiti Sains Malaysia)

  • Chee-Wooi Hooy

    (School of Management, Universiti Sains Malaysia)

  • Ahmad Zubaidi Baharumshah

    (Faculty of Economics and Management, Universiti Putra Malaysia)

Abstract

This study systemically investigates the international parity conditions for China and Japan in the liberalization era (1990:Q1-2010:Q2). Advanced econometric procedures including the structural VARX and persistent profiles are utilized in the empirical analysis. The finding upholds support for both purchasing power (PPP) and uncovered interest parity (UIP) conditions, when structural breaks due to the Asian and subprime crises were taken into accounts. By comparing the persistent profiles, we find shocks to real sector are more likely to lead to the establishment of parity at faster rate than capital market. This seems to suggest sequencing problem in market integration is not an issue.

Suggested Citation

  • Tze-Haw Chan & Chee-Wooi Hooy & Ahmad Zubaidi Baharumshah, 2012. "A structural VARX modelling of international parities between China and Japan in the liberalization era," Economics Bulletin, AccessEcon, vol. 32(1), pages 730-736.
    • Handle: RePEc:ebl:ecbull:eb-11-00438
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    References listed on IDEAS

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    Cited by:

    1. Chan, Tze-Haw & Baharumshah, Ahmad Zubaidi, 2012. "Financial Integration between China and Asia Pacific Trading Partners: Parities Evidence from the First- and Second-generation Panel Tests," MPRA Paper 37801, University Library of Munich, Germany.
    2. Chan, Tze-Haw, 2012. "Assessing the international parity conditions and transmission mechanism for Malaysia-China," MPRA Paper 38930, University Library of Munich, Germany.

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    More about this item

    Keywords

    International Parity Conditions; Market Integration; Structural VARX Modelling; Bootstrapping;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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