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Not all international monetary shocks are alike for the Japanese economy
Citation
Vespignani, J and Ratti, RA, Not all international monetary shocks are alike for the Japanese economy, Economic Modelling, 52, (Part B) pp. 822-837. ISSN 0264-9993 (2016) [Refereed Article]
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Copyright Statement
© 2015 The Authors. Published by Elsevier B.V.Licensed under Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) http://creativecommons.org/licenses/by-nc-nd/4.0/
DOI: doi:10.1016/j.econmod.2015.10.019
Abstract
This paper examines the influence of monetary aggregates shocks in the U.S., China and the Euro area on
Japan. China's monetary expansion has significant effects on Japan's economy that are quite different
from those of the U.S. and Euro area. In line with the implications of the Mundell–Fleming model when
there are capital controls in place, Chinese monetary expansion is found to primarily affect Japan through
trade. The income absorption effect of China's monetary expansion is substantial for Japan. China's monetary
expansion results in significant increases in Japan's industrial production, exports and inflation,
and decreases in the trade-weighted yen. After 24 months, monetary shocks in China forecast 20% of
the variation in Japan's real trade balance. In contrast, U.S. monetary expansion results in contraction in
Japan's industrial production, exports and trade balance (expenditure-switching). Monetary expansion in
the Euro area does not significantly affect Japan. Structural vector error correction models and a factoraugmented
model are estimated to establish robustness of results.
Item Details
| Item Type: | Refereed Article |
|---|---|
| Research Division: | Economics |
| Research Group: | Applied Economics |
| Research Field: | International Economics and International Finance |
| Objective Division: | Economic Framework |
| Objective Group: | International Trade |
| Objective Field: | International Trade not elsewhere classified |
| Author: | Vespignani, J (Dr Joaquin Vespignani) |
| ID Code: | 104849 |
| Year Published: | 2016 (online first 2015) |
| Deposited By: | Faculty of Business |
| Deposited On: | 2015-11-23 |
| Last Modified: | 2018-03-07 |
| Downloads: | 116 View Download Statistics |
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