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Macroeconomic linkages and international shock transmissions in East-Asia: a global vector autoregressive approach

The growing interdependency among East Asian countries means that there is concern not only on the way their macroeconomic variables are linked across borders, but also on the way shocks are transmitted as a consequence. This paper investigates the effect of macroeconomic linkages on international s...

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Main Authors: Hassan, Ibrahim Bakari, Mohamed, Azali, Lee, Chin, Wan Ngah, Wan Azman Saini
Format: Article
Language:English
Published: Taylor and Francis 2017
Online Access:http://psasir.upm.edu.my/id/eprint/62324/1/Macroeconomic%20linkages%20and%20international%20shock%20transmissions%20in%20East-Asia.pdf
http://psasir.upm.edu.my/id/eprint/62324/
https://www.tandfonline.com/doi/full/10.1080/23322039.2017.1370772
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spelling my.upm.eprints.623242019-10-31T07:22:28Z http://psasir.upm.edu.my/id/eprint/62324/ Macroeconomic linkages and international shock transmissions in East-Asia: a global vector autoregressive approach Hassan, Ibrahim Bakari Mohamed, Azali Lee, Chin Wan Ngah, Wan Azman Saini The growing interdependency among East Asian countries means that there is concern not only on the way their macroeconomic variables are linked across borders, but also on the way shocks are transmitted as a consequence. This paper investigates the effect of macroeconomic linkages on international shock transmissions in selected East Asian countries. Global Vector Autoregressive model (GVAR) is used on the quarterly data of real output, inflation, equity prices, exchange rates, and short-term interest rate over the period 1979Q2–2013Q1. The result generally shows that the focus countries are more linked to global economy through equity markets, real output, and exchange rates, signifying more tendencies for contagion effects in the same way. On the other hand, result from the dynamic analysis, shows that China contributes highest shock transmission in the real sector, whereas US is the highest in the equity market. For the exchange rate; within-regional shock transmission is found to be highest. The dominance of China in the real sector implies the possibility of business cycle synchronization in the region, especially if China is triggered; however, the insignificance currency-shock transmission between China and the rest of the East Asian countries contradicts one important criterion for optimum currency area. This means that China could vanguard the economic regionalism if its currency market is more developed and liberalized. More still, the dominance of US in capital market and second to China in the real sector explained the strategic importance of US in the global economy. Taylor and Francis 2017 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/62324/1/Macroeconomic%20linkages%20and%20international%20shock%20transmissions%20in%20East-Asia.pdf Hassan, Ibrahim Bakari and Mohamed, Azali and Lee, Chin and Wan Ngah, Wan Azman Saini (2017) Macroeconomic linkages and international shock transmissions in East-Asia: a global vector autoregressive approach. Cogent Economics & Finance, 5 (1). art. no. 1370772. pp. 1-21. ISSN 2332-2039 https://www.tandfonline.com/doi/full/10.1080/23322039.2017.1370772 10.1080/23322039.2017.1370772
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description The growing interdependency among East Asian countries means that there is concern not only on the way their macroeconomic variables are linked across borders, but also on the way shocks are transmitted as a consequence. This paper investigates the effect of macroeconomic linkages on international shock transmissions in selected East Asian countries. Global Vector Autoregressive model (GVAR) is used on the quarterly data of real output, inflation, equity prices, exchange rates, and short-term interest rate over the period 1979Q2–2013Q1. The result generally shows that the focus countries are more linked to global economy through equity markets, real output, and exchange rates, signifying more tendencies for contagion effects in the same way. On the other hand, result from the dynamic analysis, shows that China contributes highest shock transmission in the real sector, whereas US is the highest in the equity market. For the exchange rate; within-regional shock transmission is found to be highest. The dominance of China in the real sector implies the possibility of business cycle synchronization in the region, especially if China is triggered; however, the insignificance currency-shock transmission between China and the rest of the East Asian countries contradicts one important criterion for optimum currency area. This means that China could vanguard the economic regionalism if its currency market is more developed and liberalized. More still, the dominance of US in capital market and second to China in the real sector explained the strategic importance of US in the global economy.
format Article
author Hassan, Ibrahim Bakari
Mohamed, Azali
Lee, Chin
Wan Ngah, Wan Azman Saini
spellingShingle Hassan, Ibrahim Bakari
Mohamed, Azali
Lee, Chin
Wan Ngah, Wan Azman Saini
Macroeconomic linkages and international shock transmissions in East-Asia: a global vector autoregressive approach
author_facet Hassan, Ibrahim Bakari
Mohamed, Azali
Lee, Chin
Wan Ngah, Wan Azman Saini
author_sort Hassan, Ibrahim Bakari
title Macroeconomic linkages and international shock transmissions in East-Asia: a global vector autoregressive approach
title_short Macroeconomic linkages and international shock transmissions in East-Asia: a global vector autoregressive approach
title_full Macroeconomic linkages and international shock transmissions in East-Asia: a global vector autoregressive approach
title_fullStr Macroeconomic linkages and international shock transmissions in East-Asia: a global vector autoregressive approach
title_full_unstemmed Macroeconomic linkages and international shock transmissions in East-Asia: a global vector autoregressive approach
title_sort macroeconomic linkages and international shock transmissions in east-asia: a global vector autoregressive approach
publisher Taylor and Francis
publishDate 2017
url http://psasir.upm.edu.my/id/eprint/62324/1/Macroeconomic%20linkages%20and%20international%20shock%20transmissions%20in%20East-Asia.pdf
http://psasir.upm.edu.my/id/eprint/62324/
https://www.tandfonline.com/doi/full/10.1080/23322039.2017.1370772
_version_ 1651869088551534592
score 13.211869

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