Assessing the Economic Preconditions for a Yen Bloc

Posted: 2 Oct 2000

See all articles by Gary Madden

Gary Madden

Curtin University - School of Economics and Finance

Scott Savage

University of Colorado at Boulder - Department of Economics

Andrew McDonald

Bournemouth University; Government of the Commonwealth of Australia - Australian Prudential Regulation Authority (APRA)

Abstract

Stabilising Asia-Pacific exchange rates by establishing a system of pegs, bands or target zones around the Japanese yen requires the compromise of domestic policy autonomy. The cost of doing so is least when members reaction to economic shocks are symmetric. This study considers which currencies meet this necessary precondition. To assess regional disturbance symmetry the Blanchard and Quah (1989) procedure is employed to distinguish temporary from permanent shocks for paired aggregate output and price time-series. Disturbance correlations between Japan and other Asia-Pacific nations are calculated. Supply-side disturbance correlations are relatively weak and suggest the economic preconditions for a yen bloc are not in place.

JEL Classification: F31, F33

Suggested Citation

Madden, Gary and Savage, Scott and McDonald, Andrew, Assessing the Economic Preconditions for a Yen Bloc. Australian Economic Papers, Vol. 39, Issue 1. Available at SSRN: https://ssrn.com/abstract=231611

Gary Madden (Contact Author)

Curtin University - School of Economics and Finance ( email )

GPO Box U 1987
Perth, Western Australia 6845
Australia
(08) 9266 7763 (Phone)
(08) 9266 3026 (Fax)

Scott Savage

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-735-1165 (Phone)
303-492-1112 (Fax)

HOME PAGE: http://holiday.colorado.edu/savages/

Andrew McDonald

Bournemouth University ( email )

Fern Barrow
School of Finance & Law
Poole BH12 5BB, Dorset
United Kingdom

Government of the Commonwealth of Australia - Australian Prudential Regulation Authority (APRA)

GPO Box 9836
Sydney, NSW, 2001, NSW 2000
Australia
02 9210 3000 (Phone)
02 9210 3411 (Fax)

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