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The Nature of Aggregate Demand and Supply Shocks in ASEAN Countries

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  • Bashar, Omar H M N

Abstract

This paper revisits the issue of identification of macroeconomic shocks in ASEAN countries using an alternative identification scheme where the aggregate demand and supply shocks are allowed to be correlated. Applying the technique of Cover et al (2006) within a bivariate Structural VAR model, this paper showed that aggregate demand and supply shocks are interrelated (positively) in ASEAN countries. Unlike previous studies, it is found that changes in the output level are mainly driven by aggregate demand shocks, whereas supply shocks are playing the dominant role in affecting inflation in ASEAN countries. The correlations of the shocks across the countries are found to be quite small, suggesting that ASEAN is still not ready to form a common currency union like Europe.

Suggested Citation

  • Bashar, Omar H M N, 2009. "The Nature of Aggregate Demand and Supply Shocks in ASEAN Countries," MPRA Paper 19881, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:19881
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    References listed on IDEAS

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    7. Thiam Hee NG, 2002. "Should The Southeast Asian Countries Form A Currency Union?," The Developing Economies, Institute of Developing Economies, vol. 40(2), pages 113-134, June.
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    More about this item

    Keywords

    ASEAN; Aggregate Demand and Supply; Structural VAR; Blanchard-Quah Decomposition;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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