Regional integration and decoupling in the Asia Pacific : a Bayesian Panel VAR approach

Tools

Davidson, Sharada Nia (2022) Regional integration and decoupling in the Asia Pacific : a Bayesian Panel VAR approach. IMF Economic Review, 70 (4). pp. 773-807. ISSN 2041-417X (https://doi.org/10.1057/s41308-022-00174-8)

[thumbnail of Davidson-IMFER-2022-Regional-integration-and-decoupling-in-the-Asia-Pacific-a-Bayesian-panel]
Preview
 Text. Filename: Davidson_IMFER_2022_Regional_integration_and_decoupling_in_the_Asia_Pacific_a_Bayesian_panel.pdf
Accepted Author Manuscript
License: Strathprints license 1.0
Download (1MB)| Preview

Abstract

Policymakers have been debating for over a decade whether Asia is decoupling from the USA. Increasingly, deepening regional integration is cited as a possible driver of this decoupling. Using large Bayesian Panel Vector Autoregressions, estimated over different subperiods, we jointly examine bilateral macro-financial interdependencies between Asia Pacific countries and between each Asia Pacific country and the USA. We uncover no evidence of decoupling. Instead, we find that both global and regional interdependencies deepened following the Asian financial crisis, before receding after the Global financial crisis. We also show that while US shocks are important, attention should also be devoted to regional shocks which play a large role in Asia Pacific countries across all subperiods considered. Our results also suggest that there have been shifts in the relative importance of different transmission channels over time. Following the Asian financial crisis, as regional interdependencies deepened, US financial shocks began to play a larger role than US macroeconomic shocks. These results support the view that rising intra-regional trade contributed to a fall in the importance of US macroeconomic shocks. They are also consistent with research suggesting that strong, common global financial linkages increase the synchronization of Asian regional business cycles.

  • Item type:Article
    ID code:80846
    Dates:
    Date
    Event
    December 2022
    Published
    15 July 2022
    Published Online
    10 May 2022
    Accepted
    Subjects:Social Sciences > Economic Theory
    Department:Strathclyde Business School > Economics
    Depositing user: Pure Administrator
    Date deposited:19 May 2022 16:10
    Last modified:24 Nov 2024 01:24
    URI:https://strathprints.strath.ac.uk/id/eprint/80846
CORE (COnnecting REpositories)