| Essay I: The monetary model of the exchange rate revisited: Evidence from the Pacific Rim countries. This Chapter examines the validity of long-run structural monetary model of the exchange rate for six Pacific Rim countries, i.e., Indonesia, South Korea, Malaysia, Philippines, Singapore, and Thailand using the post-Bretton Wood data. The results from the multivariate cointegration procedure support the existence of at least one cointegrating vector, which upholds the long-run relevance of the model and as an indirect support for purchasing power parity (PPP) in these countries. The relevancy of this model is further supported by tire acceptance of some of the parameter restrictions implied by the monetary model, except for Korea and Malaysia.;Essay II: An investigation on macroeconomic shocks in the Pacific Rim countries. In this Chapter we investigate the sources of macroeconomic shocks in six Pacific Rim countries using the post-Bretton Wood data. Three shocks—supply, demand and nominal—are identified using the long-run restrictions of the structural vector autoregressive (SVAR) model, leaving the short-run dynamics to be data-determined. Our empirical results suggest that the long-run permanent change in relative output are primarily clue to (relative) supply shocks. While change in real exchange rates and relative prices are due demand and nominal shocks, respectively. The main source of fluctuations in real exchange rates is the demand shock. These results have important policy implications with regards to the choice of exchange rate regimes.;Essay III: Common trends, common cycles in per capita output of the Pacific Rim countries. The objective of this Chapter is to examine the existence (or lack) of common features in GDP per capita for ASEAN-5 countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) and in the second stage; we include China, South Korea and Japan together with ASEAN-5 in the analysis. In both cases, our results indicate the existence of a single cointegrating vector suggesting multiple common trends which can be interpreted as ‘no long-run convergence’ in the region. The co-feature rank tests suggest that in both cases, these countries share common serially correlated cycles which lend support for further economic integration either in the form of regional monetary union or common currency area. These results are in parallel with literature on establishing common currency in the region. |
