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Tze-Haw Chan, Chee-Wooi Hooy and Ahmad Zubaidi Baharumshah
''A structural VARX modelling of international parities between China and Japan in the liberalization era''
( 2012, Vol. 32 No.1 )
This study systemically investigates the international parity conditions for China and Japan in the liberalization era (1990:Q1-2010:Q2). Advanced econometric procedures including the structural VARX and persistent profiles are utilized in the empirical analysis. The finding upholds support for both purchasing power (PPP) and uncovered interest parity (UIP) conditions, when structural breaks due to the Asian and subprime crises were taken into accounts. By comparing the persistent profiles, we find shocks to real sector are more likely to lead to the establishment of parity at faster rate than capital market. This seems to suggest sequencing problem in market integration is not an issue.
Keywords: International Parity Conditions, Market Integration, Structural VARX Modelling, Bootstrapping
JEL: F3 - International Finance: General
C5 - Econometric Modeling: General
Manuscript Received : Jun 23 2011 Manuscript Accepted : Feb 24 2012

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