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International Transmission of US Monetary Policy Shocks to Asia

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  • Renato E. Reside, Jr.

    (School of Economics, University of the Philippines Diliman)

Abstract

This study estimates the individual responses of major Asian economies to an expansionary US monetary policy shock. The main result is that a US expansion leads to a real appreciation for several small, open Asian economies, with a negative impact on trade balances, eventually leading to a decline in GDP. The observed pattern of responses, where the trade balance plays a central role, is consistent with the Mundell-Fleming model. There is no evidence to support the existence of an interest rate channel in Asia, a central feature of new microfounded open economy macroeconomic models. A US expansion lowers real interest rates in the region, but Asian GDP, consumption and investment also generally fall.

Suggested Citation

  • Renato E. Reside, Jr., 2004. "International Transmission of US Monetary Policy Shocks to Asia," UP School of Economics Discussion Papers 200406, University of the Philippines School of Economics.
    • Handle: RePEc:phs:dpaper:200406
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    File URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/26/21
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    Cited by:

    1. Chibuike R. Oguanobi* & Anthony A. Akamobi & Ogonna E. Ifebi & Anne C. Maduka, 2015. "Does interest rate shocks transmit from united states to Ghana? Evidence from vector auto-regression," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(3), pages 1-12, July-Sepe.

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