Asymmetry of Shocks and Convergence in Selected ASEAN Countries: A Dynamic Analysis

NIPE Working Paper No. 3/2006

33 Pages Posted: 26 May 2006

See all articles by Carlos Cortinhas

Carlos Cortinhas

Exeter University Business School; Economic Policies Research Unit (NIPE)

Date Written: 2006

Abstract

This paper aims to investigate whether structural shocks among ASEAN countries are becoming more symmetrical over time, thus indicating whether this region is becoming better prepared to introduce a common monetary policy. For that purpose a dynamic space-state model that complements the conventional Structural VAR models used in the existing literature was estimated by using the Kalman filter so that the evolution of the degree of shock symmetry and, therefore, the evolution in the degree of convergence could be identified over time, distinguishing between a country's convergence with a regional partner and a more general trend of convergence with the rest of the world.

The results showed that in the majority of cases there has been an increase in the degree of convergence of demand shocks in recent years. More importantly, it also showed an increase in divergence in supply shocks for most cases since the beginning of the 90's even when taking into account the Asian Financial Crisis. This is especially true for the periphery countries suggesting that the Philippines and Thailand are not only not converging but actually diverging from the core group. These results have important implications for the prospects of the creation of a common monetary policy in the region.

Keywords: Optimum currency areas, Monetary integration, Asymmetric shocks, Convergence, Asean

JEL Classification: F15, F33, E42

Suggested Citation

Cortinhas, Carlos, Asymmetry of Shocks and Convergence in Selected ASEAN Countries: A Dynamic Analysis (2006). NIPE Working Paper No. 3/2006, Available at SSRN: https://ssrn.com/abstract=904565 or http://dx.doi.org/10.2139/ssrn.904565

Carlos Cortinhas (Contact Author)

Exeter University Business School ( email )

Streatham Court
Rennes Drive
Exeter EX4 4RJ
United Kingdom

Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, 4710-057
Portugal
253604510 (Phone)
253676375 (Fax)

HOME PAGE: http://www.eeg.uminho.pt/economia/nipe

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
110
Abstract Views
662
rank
287,708
PlumX Metrics