Dynamic Financial Linkages of Japan and Asean Economies: Evidence Based on Real Interest Parity
This article provides empirical evidence on the dynamic linkages of real interest rates among the ASEAN-5 during the post-liberalisation era (1984-1997). The upshots of our findings are four-fold. Firstly, there were co-movement of ASEAN real rates in the long-run and dynamic causalities in the shor...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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UUM Press
2007-06-01
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| Series: | International Journal of Management Studies |
| Subjects: | |
| Online Access: | https://e-journal.uum.edu.my/index.php/ijms/article/view/9819 |
| _version_ | 1797943169139081216 |
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| author | Ahmad Zubaidi Baharumshah Chan Tze Haw Wye Leong Roy Khong |
| author_facet | Ahmad Zubaidi Baharumshah Chan Tze Haw Wye Leong Roy Khong |
| author_sort | Ahmad Zubaidi Baharumshah |
| collection | DOAJ |
| description | This article provides empirical evidence on the dynamic linkages of real interest rates among the ASEAN-5 during the post-liberalisation era (1984-1997). The upshots of our findings are four-fold. Firstly, there were co-movement of ASEAN real rates in the long-run and dynamic causalities in the short-run, which explicitly indicated monetary inter-dependency among the ASEAN countries. Secondly, most of the forecast error variance of real interest rates in own country can be attributed to other ASEAN-4’s innovations (more than 50%), which partly explains the contagion effects during the Asia crisis of 1997/98. Thirdly, the real interest differentials are mean reverting over time, implying that RIP holds between ASEAN-Japan (except Singapore) and ASEAN-US. Forthly, the deviations from RIP have half-lives of around 6 to 11 months, meaning RIP adjustments change rapidly to its parity of equilibrium value. All in all, this finding supports the recent proposal of Currency Union with the Japanese yen taken as common currency.
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| first_indexed | 2024-04-10T20:18:56Z |
| format | Article |
| id | doaj.art-703ab5d540944f3996c6dfc0cf8bd01e |
| institution | Directory Open Access Journal |
| issn | 2232-1608 2180-2467 |
| language | English |
| last_indexed | 2024-04-10T20:18:56Z |
| publishDate | 2007-06-01 |
| publisher | UUM Press |
| record_format | Article |
| series | International Journal of Management Studies |
| spelling | doaj.art-703ab5d540944f3996c6dfc0cf8bd01e2023-01-26T03:14:32ZengUUM PressInternational Journal of Management Studies2232-16082180-24672007-06-01141Dynamic Financial Linkages of Japan and Asean Economies: Evidence Based on Real Interest ParityAhmad Zubaidi Baharumshah0Chan Tze Haw1Wye Leong Roy Khong2Faculty of Economics and Management Universiti Putra MalaysiaFaculty of Economics and Management Universiti Putra MalaysiaFaculty of Business and Law Multimedia UniversityThis article provides empirical evidence on the dynamic linkages of real interest rates among the ASEAN-5 during the post-liberalisation era (1984-1997). The upshots of our findings are four-fold. Firstly, there were co-movement of ASEAN real rates in the long-run and dynamic causalities in the short-run, which explicitly indicated monetary inter-dependency among the ASEAN countries. Secondly, most of the forecast error variance of real interest rates in own country can be attributed to other ASEAN-4’s innovations (more than 50%), which partly explains the contagion effects during the Asia crisis of 1997/98. Thirdly, the real interest differentials are mean reverting over time, implying that RIP holds between ASEAN-Japan (except Singapore) and ASEAN-US. Forthly, the deviations from RIP have half-lives of around 6 to 11 months, meaning RIP adjustments change rapidly to its parity of equilibrium value. All in all, this finding supports the recent proposal of Currency Union with the Japanese yen taken as common currency. https://e-journal.uum.edu.my/index.php/ijms/article/view/9819Interest linkagesreal interest differentialsmean reversionhalflifefinancial integration |
| spellingShingle | Ahmad Zubaidi Baharumshah Chan Tze Haw Wye Leong Roy Khong Dynamic Financial Linkages of Japan and Asean Economies: Evidence Based on Real Interest Parity International Journal of Management Studies Interest linkages real interest differentials mean reversion halflife financial integration |
| title | Dynamic Financial Linkages of Japan and Asean Economies: Evidence Based on Real Interest Parity |
| title_full | Dynamic Financial Linkages of Japan and Asean Economies: Evidence Based on Real Interest Parity |
| title_fullStr | Dynamic Financial Linkages of Japan and Asean Economies: Evidence Based on Real Interest Parity |
| title_full_unstemmed | Dynamic Financial Linkages of Japan and Asean Economies: Evidence Based on Real Interest Parity |
| title_short | Dynamic Financial Linkages of Japan and Asean Economies: Evidence Based on Real Interest Parity |
| title_sort | dynamic financial linkages of japan and asean economies evidence based on real interest parity |
| topic | Interest linkages real interest differentials mean reversion halflife financial integration |
| url | https://e-journal.uum.edu.my/index.php/ijms/article/view/9819 |
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