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Regional and Industry Cycles in Australasia: Implications for a Common Currency

  • Arthur Grimes

    (Motu Economic & Public Policy Research)

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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File URL: http://econwpa.repec.org/eps/mac/papers/0509/0509020.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0509020.

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Length: 42 pages
Date of creation: 12 Sep 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0509020
Note: Type of Document - pdf; pages: 42
Contact details of provider: Web page: http://econwpa.repec.org

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  5. Arthur Grimes & Andrew Aitken & Suzi Kerr, 2004. "House Price Efficiency: Expectations, Sales, Symmetry," Urban/Regional 0408001, EconWPA.
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  8. Arthur Grimes & Andrew Aitken, 2004. "What's the Beef with House Prices? Economic Shocks and Local Housing Markets," Working Papers 04_08, Motu Economic and Public Policy Research.
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  13. Suzi Kerr, 2003. "Motu, Excellence in Economic Research and the Challenges of 'Human Dimensions' Research," Working Papers 03_05, Motu Economic and Public Policy Research.
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  15. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. 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 pr," Working Papers 03_17, Motu Economic and Public Policy Research.
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  23. Arthur Grimes, 2005. "Intra & Inter-Regional Industry Shocks: A New Metric with an Application to Australasian Currency Union," Macroeconomics 0509019, EconWPA.
  24. Richard Fabling & Arthur Grimes, 2004. "Insolvency and Economic Development:Regional Variation and Adjustment," Development and Comp Systems 0404006, EconWPA.
  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. Michael A. Kouparitsas, 2001. "Is the United States an optimum currency area? an empirical analysis of regional business cycles," Working Paper Series WP-01-22, Federal Reserve Bank of Chicago.
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  36. 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.
  37. Suzi Kerr, 2003. "Efficient Contracts for Carbon Credits from Reforestation Projects," Working Papers 03_12, Motu Economic and Public Policy Research.
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