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Regional and industry cycles in Australasia: Implications for a common currency

  • Grimes, Arthur

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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Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 16 (2005)
Issue (Month): 3 (June)
Pages: 380-397

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Handle: RePEc:eee:asieco:v:16:y:2005:i:3:p:380-397
Contact details of provider: Web page: http://www.elsevier.com/locate/asieco

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  1. Arthur Grimes & Suzi Kerr & Andrew Aitken, 2004. "Bi-Directions Impacts of Economic, Social and Environmental Changes and the New Zealand Housing Market," Working Papers 04_09, Motu Economic and Public Policy Research.
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  13. Michael T. Owyang & Howard J. Wall, 2004. "Structural breaks and regional disparities in the transmission of monetary policy," Working Papers 2003-008, Federal Reserve Bank of St. Louis.
  14. 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.
  15. Arthur Grimes, 2003. "Economic Growth and the Size and Structure of Government: Implications for New Zealand," Working Papers 03_10, Motu Economic and Public Policy Research.
  16. Russell W. Cooper & Hubert Kempf, 2002. "Overturning Mundell: fiscal policy in a monetary union," Staff Report 311, Federal Reserve Bank of Minneapolis.
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  18. Dean R. Hyslop & David C. Maré, 2004. "Understanding New Zealand s Changing Income Distribution 1983 98:A Semiparametric Analysis," Microeconomics 0402014, EconWPA.
  19. Richard Fabling & Arthur Grimes, 2004. "Insolvency and Economic Development:Regional Variation and Adjustment," Development and Comp Systems 0404006, EconWPA.
  20. 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.
  21. 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.
  22. Arthur Grimes & Suzi Kerr & Andrew Aitken, 2003. "Housing and Economic Adjustment," Working Papers 03_09, Motu Economic and Public Policy Research.
  23. 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.
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  25. 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.
  26. 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.
  27. David C. Maré & Jason Timmins, 2003. "Moving to Jobs?," Working Papers 03_07, Motu Economic and Public Policy Research.
  28. Suzi Kerr, 2003. "Indigenous Forests and Forest Sink Policy in New Zealand," Working Papers 03_15, Motu Economic and Public Policy Research.
  29. Arthur Grimes, 2004. "New Zealand: A Typical Australasian Ecomony?," Working Papers 04_11, Motu Economic and Public Policy Research.
  30. 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 pre," Others 0403001, EconWPA.
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  32. Arthur Grimes, 2005. "Intra & Inter-Regional Industry Shocks: A New Metric with an Application to Australasian Currency Union," Macroeconomics 0509019, EconWPA.
  33. Suzi Kerr & Catherine Leining, 2003. "Joint Implementation in Climate Change Policy," Working Papers 03_04, Motu Economic and Public Policy Research.
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  36. 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.
  37. Haug, Alfred A, 2001. "Co-movement towards a Currency or Monetary Union? An Empirical Study for New Zealand," Australian Economic Papers, Wiley Blackwell, vol. 40(3), pages 307-17, September.
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  39. Suzi Kerr, 2003. "Allocating Risks in a Domestic Greenhouse Gas Trading System," Others 0309003, EconWPA.
  40. Viv Hall & Kunhong Kim & Robert Buckle, 1998. "Pacific rim business cycle analysis: Synchronisation and volatility," New Zealand Economic Papers, Taylor & Francis Journals, vol. 32(2), pages 129-159.
  41. 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.
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