International co-movements and business cycle transmission between Korea and Japan

This study examines the economic relationship and interdependence between Korea and Japan. Using macroeconomic data, an event chronology, and trade flows, I examine the question, are business cycles transmitted from Japan to Korea, and/or from Korea to Japan? And, how has that transmission changed over time? The study uses structured vector autoregressions (SVARs) to analyze monthly data 1960.01–2002.01 on industrial production, prices, interest rates, money supplies, and exchange rates. Japanese business cycles are found to have a moderate effect upon business cycle fluctuations in Korea, and that influence seems to be increasing over time. J. Japanese Int. Economies 18 (1) (2004) 57–83.     

Trade integration and business cycle co-movements: the case of Korea with other Asian countries

As Korea increases its trade within Asia, it is becoming more and more integrated with the other economies in the region. Theoretically, increased trade can lead business cycles across trading partners to be patterned in either direction, towards convergence or divergence. By using data for 12 Asian economies, this paper finds that intra-industry trade is the major channel by which the business cycle of Korea becomes synchronized with that of other Asian economies, although increased trade itself does not necessarily lead to close business cycle coherence.     

Business cycle transmission and interdependence between Japan and Australia

This paper investigates business cycle transmission and interdependence between Australia and Japan over the period 1961.1–1994.4. Vector autoregression (VAR) and vector error correction (VEC) models were constructed utilizing GDP/GNPs, producer prices, interest rates and money supplies. The model is tested for cointegration. Two cointegrating vectors are found, and a vector error correction (VEC) model is estimated. The coefficients and the F-tests of the VEC are used to measure the effect of one economy upon the other. Impulse responses from a VAR are examined for evidence of business cycle transmission, and recursive least squares estimates are used to check for structural change in the relationship. Figures are used to graphically demonstrate these relationships and have been collected in an appendix, which can be found at the end of the text.While the two countries engage in a close trading relationship, the two economies are found to be only somewhat interdependent in macroeconometric terms. Japan is found to transmit some of its business cycle fluctuations to Australia, but there is little reverse transmission.     

Changes in the Sources of Modern Economic Growth: Japan Compared with the United States

The major question addressed in this paper is whether the pattern of economic growth based largely on capital accumulation preceded the pattern predominantly dependent on improvement in efficiency as measured by growth of total factor productivity. Observations on Japan extending back to the early phase of modern economic growth, together with those on the United States by Abramovitz, show that a shift from accumulation-based growth to efficiency-based growth occurred in Japan in the same manner as in U.S. economic history. This shift appears to have been associated with a change in the bias of technological progress from the use of physical capital to the use of human capital. Despite this similarity, economic growth in Japan has continued to depend more heavily on physical capital accumulation even since Japan's economy has reached a mature stage. The significant lag in shifting to efficiency-based growth seems to be characteristic of economic growth based on borrowed technology. This hypothesis is consistent with the similarity in growth patterns between Japan and newly industrializing economies in East Asia.J. Japan. Int. Econ., March 1999,13(1), pp. 1–21. School of International Politics, Economics and Business, Aoyama Gakuin University, Shibuya, Shibuya-ku, Tokyo 150-8366, Japan; and Japan Energy Research Institute, Toranomon 4-3-13, Minato-ku, Tokyo 105-0001, Japan.Copyright 1999 Academic Press.Journal of Economic LiteratureClassification Numbers: N15, O47, O57.     

The determinants of FTA use in Southeast Asia: A firm-level analysis

The spread of free trade agreements (FTAs) in Southeast Asia has ignited a debate about their impact on enterprises including the business costs from the Asian ‘noodle bowl’ effect. This paper undertakes a comparative and firm-level analysis of the determinants of FTA use in Indonesia, Malaysia and the Philippines. The likelihood of firms using important ASEAN+1 FTAs (e.g. the ASEAN-China FTA, the ASEAN-Japan FTA and ASEAN-Korea FTA) is positively associated with acquiring knowledge about FTAs, building technological capabilities, and membership in industrial clusters. Non-use of FTAs is explained by a lack of information about FTAs and the absence of FTAs with major trading partners. Key policy implications are the need to improve business support for FTAs, to conclude FTAs with major trading partners, and to create a database on FTA preference use.     

The Japanese Labor Markets: Unemployment and Vacancies

We employ a disequilibrium model to examine the disequilibrium and structural causes of unemployment and vacancies in Japanese labor markets on the basis of business survey data. The Keynesian is a primary determinant of unemployment and the underconsumption of vacancies in most subperiods for both large and small firms. The degree of mismatch in the labor markets for large firms is lower than that for small ones. It exhibits a decreasing trend until the beginning of the eighties, then reverses to an increasing one around the mid-eighties. This paper contributes to issues such as recently conspicuous structural causes, transfer of employees, and dual structure through an alternative approach to the conventional methods. J. Japan. Int. Econ. June 1999, 13(2), pp. 91–118. Faculty of Economics, Tohoku University, Sendai 980-8576, Japan; and Faculty of Economics, Niigata University, Niigata 950-21, Japan. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: D58, J60, C40.     

The role of production fragmentation in international business cycle synchronization in East Asia

This paper analyzes factors contributing to the observed increase in international business cycle synchronization between eight East Asian developing countries and the major developed economies of Japan and the United States. To this end, a two-country dynamic general equilibrium (DGE) model is proposed which focuses on the role of production fragmentation among these countries. A key feature of the model is that it includes the trade in differentiated capital goods, which are added to the capital stock for production, and the technology embodied in these capital goods. The parameters of the model are calibrated using actual data of the countries included. Model simulations are conducted for two periods (1993–1997 and 1999–2005), before and after the Asian financial crisis, showing that the increase in business cycle synchronization can be attributed mainly to the growing fragmentation of production activities.     

Finnish and Swedish business cycles in a global context

This paper evaluates the decisions made by the Finnish government to join EMU and the Swedish government not to join EMU in the early 1990s. Focusing on the characteristics of business cycles during the postwar period, we find that output fluctuations in Sweden and Finland are correlated to two measures of the international business cycle, a European and a non-European cycle. The Finnish cycle has become more synchronized to the European cycle but less synchronized to the non-EU cycle after 1999. For Sweden we find the opposite result. The decision by the Finnish government to join EMU on schedule is justified ex post but was not justified ex ante. Similarly, the decision by the Swedish government not to join EMU in 1999 seems to be justified ex post but was not justified ex ante. Our empirical evidence suggests that economic decisions based on historical data may not be optimal ex ante but they may be defensible ex post.     

Is the US no longer the economy of first resort? Changing economic relationships in the Asia-Pacific region

This paper tests the hypothesis that the economic relationships between China and her major trading partners have changed over the past 20 years with the industrialisation of China, and the emergence of Japan as a source of investment and network trade in sophisticated manufactures, and the US as a source of finance and investment assets, supplier of services and an apparently inexhaustible demand for consumer and intermediate goods. Has this changed the size and direction of spillovers in the region, and has it curtailed or eliminated American economic leadership? We use time-varying spectral methods to decompose the links between the two leading Asian economies and the US. We find: (a) the links with the US have been weakening, while those based on China have strengthened; (b) that this is not new—it has been happening since the 1980s, but has now been reversed by the surge in trade; (c) that the links with the US have been rather complex, with the US able to shape the cycles elsewhere through her control of monetary conditions, but the China zone able to control the size of their cycles; (d) that Japan remains linked to (and dependent on) the US; and (e) there is no evidence that pegged exchange rates encourage convergence.     

中国-东盟FTA贸易效应实证研究

中国-东盟自由贸易区(CAFTA)的成立对中国和东盟国家具有重要的经济与政治意义。本文利用一个扩展后的引力模型对CAFTA的贸易效应进行了实证分析。结果显示:CAFTA对区内贸易具有显著扩大效应的同时也显著地促进了与非成员之间的贸易;CAFTA符合"自然的贸易伙伴"的事前贸易关系紧密和空间距离接近标准;同时,CAFTA成员间产品出口结构以互补性为主;进一步降低成员间贸易壁垒、加强贸易合作对CAFTA成员间和世界贸易的扩大具有积极意义。     

中国在东亚经济一体化中的角色演化与策略选择:基于经济周期同步性的实证研究

本文利用经济周期同步性对于区域经济一体化的理论涵义,选取5种代表性度量方法,分析了1990Q1～2011Q3期间包含中国在内9个东亚经济体和多种经济体组合的经济周期同步性及其阶段性变化,并将实证结果同东亚经济一体化进程的评价与展望、中国在区域经济中的角色演化及未来参与区域合作的策略选择等分析相融合。结果表明,东亚的总体经济周期同步性程度还不高,增长也不明显,但中日韩组合的总体同步性明显强于其它经济体组合,且显著增强;同时,中国与其他东亚经济体的同步性近年来有显著提高,充分体现出自身经济与区域经济的加速融合以及在未来区域一体化进程中赶超日本地位的趋势。尽管美国与其他东亚经济体的同步性情况与中国相似,却存在本质上的差别。     

On Regional Monetary Arrangements for ASEAN

This paper analyzes the extent to which ASEAN may be suitable for a regional monetary arrangement. On the economic front, we review evidence on patterns of trade, economic shocks, the extent of factor mobility, and the monetary transmission mechanism. We find that ASEAN today is less suitable for a regional monetary arrangement than the Euro area was before the Maastricht Treaty, but the differences are not large. On the political front, we analyze the prerequisites for monetary integration in light of 50 years of European experience. We conclude that a firm political commitment would be key to ensuring that an attempt to form a regional monetary arrangement is not viewed as simply another fixed exchange rate system open to speculative attack. That commitment would have to be strong enough to survive for an extended period and to support difficult decisions such as rendering the central bank independent, adhering to fiscal and exchange rate arrangements even if the policy stance conflicts with that which would be adopted on the basis of purely domestic considerations, and accepting supranational directives. These are very considerable prerequisites for success. J. Japan. Int. Econ., June 2000, 14(2), pp. 121–148. International Monetary Fund; University of California, Berkeley; and International Monetary Fund. Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: F33, F36, F41, F42.     

A COMPARATIVE ANALYSIS OF THE SYNCHRONISATION OF BUSINESS CYCLES FOR DEVELOPED AND DEVELOPING ECONOMIES WITH THE WORLD BUSINESS CYCLE

Globalisation brought about worldwide changes, including economic and financial integration between countries. The objective of this paper is to establish if there is synchronisation between developed and developing countries with the world cycle. Research results show that business cycles have become less volatile after globalisation, but there is not much consensus on whether business cycles have become less or more synchronised since globalisation. Little research has been done on co‐movement between emerging markets, such as South Africa, and the world business cycle. This paper derives common factors for developed and developing countries by applying principal component analysis (PCA) to output, consumption and investment data, which represents the countries' business cycles. The empirical analysis shows co‐movement between some countries and the world business cycle (G7 countries as proxy). The results suggest that there are idiosyncratic and globally common shocks, which play different roles over time in different countries. The paper goes on to suggest that there are clear differences in how developed and emerging markets co‐move with the world business cycle. A key finding is that the co‐movement between developing economies and the world business cycle has increased since globalisation. This research also confirms previous research that most economies follow the world business cycle when large shocks – such as the recent economic downturn – occur. This has implications for forecasting the business cycle, especially in times of economic turmoil.     

Chinese exchange rate and price effects on G3 import prices

This paper explores the degree of price and exchange rate interdependence between China and the G3 (US, Japan and the Euro-zone) by undertaking a VAR based shock analysis. A GARCH framework is also employed to derive the conditional variances to uncover the extent of volatility transmission. We address two key issues. First as there have been concerns about low value-added cheap Chinese goods flooding G3 markets, we attempt to measure the impact of Chinese prices on G3 import prices. Second, we focus on the transmission of exchange rate shocks – a subject which we approach by examining shocks in China's bilateral exchange rate with each of these major trading partners (the US, Japan and the Euro Area). Our results indicate that reduced import prices from China are the channel through which aggregate domestic prices in the G3 remain depressed, while the impact of the RMB exchange rate with G3 currencies appears less powerful. This finding implies that the Chinese authorities’ RMB exchange rate policy is relatively unimportant and, in particular, that a revaluation of the RMB would not do much to reduce the US trade deficit. In terms of volatility spillover, the relatively flexible RMB exchange rate against the Euro results in RMB-EUR volatility having a stronger influence than the more tightly controlled RMB-USD rate on the volatility of Chinese export prices.     

Turnover tax and trading volume: Panel analysis of stocks traded in the Japanese and US markets

Japan eliminated turnover tax on stock trading through the end of the 1990’s to revitalize its ailing stock market by reducing the overall transaction cost for stock trading. This paper empirically examines the effect of this exogenous, institutional change in tax policy on stock trading volume in the Japanese market. To do so, we use panel data of stocks traded in both the Japanese and United States markets and compare changes in their trading volumes at the times of the tax changes. We use a well-established V-shape relationship between turnover and price change, with three different assumptions as regards how the price change relates to turnover across stocks and markets. Although a model allowing for both slope and intercept shifts does not offer any indications one way or the other, a more restricted model allowing only for an intercept shift clearly suggests a statistically significant increase in trading volume in the Japanese market but not in the United States markets for April 1999. However, such a result was not obtained for April 1996. These results indicate that the abolition of turnover tax in 1999, but not the rate reduction in 1996, contributed to the trading volume increase.     

Lessons from the euro zone for the East Asian economies

This paper endeavors to contribute to the solution of the following critical issues: (1) what the East Asian nations can do in cooperation among themselves and with China, Japan, and South Korea in their foreign trade arrangements to improve the stability and growth of their economies; (2) what they must do individually to get their financial and real economies better integrated; (3) what they can do in cooperation with China, Japan and South Korea—bilaterally and regionally—to modernize their monetary systems and to render them more resilient to financial crises; and (4) what new focus of the IMF is most likely to enable the East Asian nations to maintain relatively free and open economies without the impact of catastrophic financial crises. Lessons from the development of the European Union, the dynamics of the euro zone, the experience of the Bank for International Settlements, and recent research on monetary and international macroeconomic theory are drawn upon to provide answers to these questions. It is argued that an area-wide approach, with a new IMF regional role and the formation of an East Asian Monetary Authority, would contribute to a sense of “community” within East Asia, leading to an enhanced role for both East Asia and ASEAN + 3 in the new world economic order.     

Does International Diversification Really Diversify Risks?

This paper demonstrates that large adverse shocks are more highly correlated with one another than positive shocks across national stock markets of industrialized economies. This finding is robust if we allow for an ARCH process or if we exclude the data of October 1987. It is shown that the negative skewness of the world market portfolio is primarily responsible for such time-varying correlations of national stock markets. We propose to model the world market portfolio return by using the extended QGARCH model of J. Y. Campbell and L. Hentschel (1992, J. Finan. Econ.31, 281–318). The finding suggests that the U.S. investors' benefit from international portfolio diversification could be far more limited than is commonly thought. J. Japan. Int. Econ., March 2002, 16(1) pp. 109–134. Institute of Economic Research, Hitotsubashi University, Kunitachi-city, Tokyo 186–8603, Japan; and Institute of Policy and Planning Sciences, University of Tsukuba, Tsukuba, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: F30, G11, G15.     

Trade bloc formation in inter-war Japan.: A gravity model analysis

The purpose of this paper is to discuss the trading system in the inter-war period concerning the Japanese Empire by means of border effect analysis in the gravity model. The results show sizeable and steadily increasing trading bloc border effects from the 1910s through the 1930s. This sizeable border effect might have resulted from many possible factors: trade diversion and creation due to increased protectionism and industrialisation in Korea and Formosa, certain political factors, and Japanese migration to Korea and Formosa, which contributed to a 52% increase of bloc border effects in mainland Japan. J. Japanese Int. Economies 21 (2) (2007) 214–236.     

Are All Banking Crises Alike? The Japanese Experience in International Comparison

This paper examines episodes of banking sector distress for a large sample of developed and developing countries, highlighting the experience of Japan. We estimate a multivariate probit model that links the likelihood of banking problems to a set of macroeconomic variables and institutional characteristics. The model predicts a high probability of banking sector distress in Japan in the early 1990s. The likelihood of an episode of banking distress rose in line with the sharp drop in asset prices, deepening recession and a “moral hazard” problem (financial liberalization combined with explicit deposit insurance). J. Japan. Int. Econ., September 1999, 13(3), pp. 155–180. Department of Economics, Social Sciences 1, University of California, Santa Cruz, California 95064 Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: E44, G21, O16.     

中国内地与香港经济周期的区制依赖协同性分析——纳入美国经济影响的实证

本文运用Markov区制转移模型,对中国内地与香港经济周期协同性的区制依赖特征以及美国对两地经济周期协同性的影响进行了分析。实证结果不仅证实两地经济周期的协同性存在依赖于经济周期区制状态的门限性质,而且显示:两地经济周期的正向协同性,隐含了美国作为两地之间经济冲击的传递渠道以及两地共同的外部冲击源的影响;当剥离出美国经济的影响之后,两地经济周期的协同程度较为微弱。在此背景下,促进中国内地与香港经济周期的长期趋同,应科学甄别和合理利用美国经济对两地经济周期协同性的影响。