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

  • Shinji Takagi

    (International Monetary Fund)

  • Mototsugu Shintani

    (Vanderbilt University)

  • Tetsuro Okamoto

    (Osaka Sangyo University)

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. © 2004 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 86 (2004)
Issue (Month): 4 (November)
Pages: 858-867

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Handle: RePEc:tpr:restat:v:86:y:2004:i:4:p:858-867
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  1. Faust, Jon & Leeper, Eric M, 1997. "When Do Long-Run Identifying Restrictions Give Reliable Results?," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 345-53, July.
  2. Baxter, Marianne & Stockman, Alan C., 1989. "Business cycles and the exchange-rate regime : Some international evidence," Journal of Monetary Economics, Elsevier, vol. 23(3), pages 377-400, May.
  3. Wyplosz, Charles, 1997. "EMU: Why and How It Might Happen," CEPR Discussion Papers 1685, C.E.P.R. Discussion Papers.
  4. John Williamson, 1995. "What Role of Currency Boards?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa40, January.
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