External Shocks, Transmission Mechanisms and Deflation in Asia
This paper examines the inflation experience of seven small economies in East Asia: Hong Kong, Malaysia, Korea, Philippines, Singapore, Taiwan, and Thailand. It documents common elements in the inflation processes across countries that are not only due to the reaction of the countries to the crisis in 1997-98. Using a particular recursive form of a vector autoregression model the paper finds empirical support for the view that developments in the world economy, as measured by inflation, growth, and interest rate developments in the United States, have very strong influences on each of the countries. The importance of the United States is explained by the historical tendency of the countries in the region to limit fluctuations of their exchange rates vis-¨¤-vis the dollar. Observed differences in the degree of dependence on the US can indeed be ascribed to differences in exchange rate/monetary policy responses to external shocks. The empirical results also show that Mainland China has been a less important source of external shocks than is commonly thought.
|Date of creation:||Jun 2005|
|Date of revision:|
|Contact details of provider:|| Postal: 55th Floor , Two International Finance Centre , 8 Finance Street , Central, Hong Kong|
Phone: (852)2878 1978
Fax: (852)2878 7006
Web page: http://www.hkimr.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alexander W. Hoffmaister & Jorge Roldos, 1997. "Are Business Cycles Different in Asia and Latin America?," IMF Working Papers 97/9, International Monetary Fund.
- Taimur Baig & JÃ¶rg Decressin & Tarhan Feyzioglu & Manmohan S. Kumar & Chris Faulkner-MacDonagh, 2003. "Deflation; Determinants, Risks, and Policy Options," IMF Occasional Papers 221, International Monetary Fund.
- David O. Cushman & Tao Zha, 1995.
"Identifying monetary policy in a small open economy under flexible exchange rates,"
FRB Atlanta Working Paper
95-7, Federal Reserve Bank of Atlanta.
- Cushman, David O. & Zha, Tao, 1997. "Identifying monetary policy in a small open economy under flexible exchange rates," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 433-448, August.
- Hans Genberg, 2003.
"Foreign versus domestic factors as sources of macroeconomic fluctuations in Hong Kong,"
IHEID Working Papers
05-2003, Economics Section, The Graduate Institute of International Studies.
- Hans Genberg, 2003. "Foreign Versus Domestic Factors as Souces of Macroeconomic Fluctuations in Hong Kong," Working Papers 172003, Hong Kong Institute for Monetary Research.
- Hans Genberg & Laurent L. Pauwels, 2004.
"Wage-Price Dynamics and Deflation in Hong Kong,"
IHEID Working Papers
06-2004, Economics Section, The Graduate Institute of International Studies.
- Gerlach-Kristen, Petra, 2006. "Internal and external shocks in Hong Kong: Empirical evidence and policy options," Economic Modelling, Elsevier, vol. 23(1), pages 56-75, January.
- Alan G. Ahearne & Joseph E. Gagnon & Jane Haltmaier & Steve Kamin ... [et al.]., 2002. "Preventing deflation: lessons from Japan's experience in the 1990s," International Finance Discussion Papers 729, Board of Governors of the Federal Reserve System (U.S.).
- Philip Schellekens, 2003. "Deflation in Hong Kong SAR," IMF Working Papers 03/77, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:hkm:wpaper:062005. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (HKIMR)
If references are entirely missing, you can add them using this form.