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Assessing the Economic Preconditions for a Yen Bloc
Author(s) -
Madden Gary,
Savage Scott,
McDonald Andrew
Publication year - 2000
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.00072
Subject(s) - economics , compromise , disturbance (geology) , autonomy , precondition , macroeconomics , international economics , political science , geology , paleontology , computer science , law , programming language
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.