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Identifier to cite or link to this item: https://hdl.handle.net/10086/17130

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Title
Re-examining Symmetry of Shocks for East Asia: Results Using a VAR with Sign Restrictions
Creator
Creator Name
Khai, Vu Tuan Khai, Vu Tuan
Affiliation
Affiliation Name
Yokohama National University
Editor
Contributor Name
社会科学の高度統計・実証分析拠点構築 = Research Unit for Statistical and Empirical Analysis in Social Sciences
Key Word
Structural VAR
Long run restriction
Sign restriction
Symmetry of Shocks
Common Currency
East Asia
JEL
E32
F33
F41
Abstract
I revisit the hotly debated topic regarding the possibility of introducing a common currency for East Asia from the point of view of shock symmetry. I first point out a serious problem of the existing studies which use the VAR method with long-run restrictions developed by Blanchard and Quah (1989) in that the signs of the impulse response functions to the same structural shock are not necessarily consistent across the countries. This means that the high (low) correlations of structural shocks do not necessarily imply low (high) costs of a common currency area. To overcome this problem, I apply the VAR method with sign restrictions developed by Uhlig (2005). I used the AD-AS model to impose sign restrictions on the responses of GDP and CPI to demand and supply shocks. One main finding is that demand shocks are significantly positively correlated among almost all East Asian countries. But overall, East Asia as a whole is not suitable for a common currency because correlations of supply shocks are low.
Description
This version: March, 2009
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2009-03
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
Global COE Hi-Stat Discussion Paper Series ; No. 42
Relation
Related Identifier
URI
  http://gcoe.ier.hit-u.ac.jp/english/index.html
Number of Pages
31
Sponsorship
グローバルCOEプログラム = Global COE Program
Appears in Collections
Global COE Hi-Stat Discussion Paper Series
URL
https://hdl.handle.net/10086/17130