Macroeconomic interdependence in East Asia

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4 Citations (Scopus)

Abstract

This paper analyzes macroeconomic interdependence among 10 Asian economies. In this connection, we decompose their macroeconomic activities (real GDP) into common and country-specific components using the Bai-Ng method (2004). Our results suggest first that both components are non-stationary and have permanent effects on their overall economy. Second, we find the relative importance of common factors in all countries in terms of their contribution to variations in real GDP. But evidence is also obtained for country-specific effects becoming increasingly important in countries like China in recent years. Therefore, if, for example, China is expected to grow at a fast pace in future, our findings imply that creation of a regional monetary union of these 10 countries needs to be held back until the Chinese economy has become more dominant in the region.

Original languageEnglish
Pages (from-to)219-227
Number of pages9
JournalJapan and the World Economy
Volume22
Issue number4
DOIs
Publication statusPublished - 2010 Dec
Externally publishedYes

Keywords

  • Asian economic integration
  • Common and idiosyncratic factors
  • Factor models

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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