Chapter

Understanding Business Cycle Synchronization: Is Inflation Targeting Paving the Way to Asian Monetary Union?

Andrew K. Rose

in Costs and Benefits of Economic Integration in Asia

Published in print February 2011 | ISBN: 9780199753987
Published online September 2011 | e-ISBN: 9780199896783 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199753987.003.0004
Understanding Business Cycle Synchronization: Is Inflation Targeting Paving the Way to Asian Monetary Union?

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This empirical chapter is concerned with the determination of business cycle synchronization. The chapter focuses in particular on the role of monetary regimes. Inflation targeting seems to have a small but positive effect on the synchronization of business cycles; countries that target inflation seem to have cycles that move more closely with foreign cycles. Monetary union also has a positive effect on business cycle synchronization, and in turn is more sustainable with greater synchronization. This suggests that a regime of inflation targeting can be useful in easing the transition towards monetary union, above and beyond any of its intrinsic merits.

Keywords: GDP; output; bilateral; empirical; data; insulation; regime; monetary; fixed; union

Chapter.  13677 words.  Illustrated.

Subjects: Business and Management

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