Identifying Shocks in Regionally Integrated East Asian Economies with Structural VAR and Block Exogeneity

Kiyotaka Sato, Zhaoyong Zhang and Michael McAleer
Authors registered in the RePEc Author Service: ZhongXiang Zhang and Zhaoyong Zhang

No EI 2010-09, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: In this paper we use a structural VAR model with block exogeneity to investigate if external shocks originating from the USA played a dominant role in influencing the macroeconomic fluctuations in East Asia during the period 1978-2007. The empirical results show a dynamic effect of external shocks, implying that, even though regional integration appears to be deepening and accelerating, especially after the recent global financial crisis, the influence of US shocks on real output fluctuations in the East Asian region is still very strong. The effects of Chinese shocks show an increasing trend over time, but the impacts are still small and not comparable with those of US shocks. The world oil price shock has become increasingly important in influencing the stability of real output growth in the region. The results from variance decomposition and impulse response analysis confirm the findings. Even though Japanese firms have established production networks in East Asia through trade and investment, and China has also grown rapidly and become a key regional country, the results suggest that US influence in the region is still asymmetric and strong. Therefore, it is difficult to conclude that shocks to the East Asian economies have become more regionally oriented.

Keywords: East Asia; block exogeneity; external shocks; monetary union; structural vector autoregression (search for similar items in EconPapers)
JEL-codes: F33 F36 F41 (search for similar items in EconPapers)
Date: 2010-02-08
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Identifying shocks in regionally integrated East Asian economies with structural VAR and block exogeneity (2011)
Working Paper: Identifying Shocks in Regionally Integrated East Asian Economies with Structural VAR and Block Exogeneity (2010)
Working Paper: Identifying Shocks in Regionally Integrated East Asian Economies with Structural VaR and Block Exogeneity (2009)
Working Paper: Identifying Shocks in Regionally Integrated East Asian Economies with Structural VAR and Block Exogeneity (2009)
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