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

Author Info

Listed author(s):
  • Shinji Takagi

    ()

    (Independent Evaluation Office, International Monetary Fund, Washington, D.C.)

  • Mototsugu Shintani

    ()

    (Department of Economics, Vanderbilt University)

  • Tetsuro Okamoto

    ()

    (Faculty of Economics, Osaka Sangyo University)

Abstract

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.

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File URL: http://www.accessecon.com/pubs/VUECON/vu03-w15.pdf
File Function: First version, 2003
Download Restriction: no

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0315.

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Date of creation: Jul 2003
Handle: RePEc:van:wpaper:0315
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Keywords: Currency union; foreign exchange rates; Japanese economy; price convergence; San Francisco Peace Treaty; vector autoregressions;

Other versions of this item:

Find related papers by JEL classification:
  • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
  • F15 - International Economics - - Trade - - - Economic Integration
  • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
  • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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  1. John Williamson, 1995. "What Role of Currency Boards?," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa40.
  2. Lutkepohl, Helmut, 1990. "Asymptotic Distributions of Impulse Response Functions and Forecast Error Variance Decompositions of Vector Autoregressive Models," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 116-125, February.
  3. 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.
  4. 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 345-353, July.
  5. Charles Wyplosz, 1997. "EMU: Why and How It Might Happen," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 3-21, Fall.
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Cited by:

  1. Nagayasu, Jun, 2010. "Regional Inflation (Price) Behaviors: Heterogeneity and Convergence," MPRA Paper 25430, University Library of Munich, Germany.
  2. Nagayasu, Jun, 2011. "Heterogeneity and convergence of regional inflation (prices)," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 711-723.

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