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Not all international monetary shocks are alike for the Japanese economy


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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© 2015 The Authors. Published by Elsevier B.V.Licensed under Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0)

DOI: doi:10.1016/j.econmod.2015.10.019


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
Objective Division:Economic Framework
Objective Group:International trade policy
Objective Field:International trade policy not elsewhere classified
UTAS Author:Vespignani, J (Associate Professor Joaquin Vespignani)
ID Code:104849
Year Published:2016 (online first 2015)
Web of Science® Times Cited:3
Deposited By:Faculty of Business
Deposited On:2015-11-23
Last Modified:2018-03-07
Downloads:187 View Download Statistics

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