The Korean Journal of Economic Studies
siness Cycle Synchronization in East Asia and Implications for a Regional Currency Union
Wongun Song (Federation of Korean Industries), Hyeon-seung Huh (Yonsei University), Yeseul Hyun (Boston University)Year 2015Vol. 63No. 1
Abstract
This paper empirically examines how closely East Asian economies movetogether in response to world, regional and country shocks, with a view togauging the feasibility of a regional currency union. Unlike previous studies,a block vector autoregression (VAR) model is employed to analyze a large setof macroeconomic variables for 10 major countries in the region. Resultssuggest that regional GDP shocks play a pivotal role in accounting for thevariation in individual countries’ GDP. The majority of the GDPs in East Asiaexhibit similar responses to the two major determinants of regional and worldGDP shocks. Overall, the evidence presents positively for consideration of aregional currency union in East Asia. For comparison, the paper alsoestimates the degree of business cycle synchronization across Eurozonecountries for the period prior to the launch of the euro in 1999.