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This paper analyzes how those global shocks as foreign business cycles and exchange rate realignments affect the Japanese economy and whether there are structural changes in the transmission mechanism of these shocks in the recent period by using a VAR model. This paper finds that, since the 1990s the impact of exchange rate changes on the Japanese economy has become smaller and/or insignificant. But the spillover effect of business cycles in U.S. and Europe turns out to have become larger and that from East Asia, once being small and insignificant, become large and significant in the 2000s. To sum up, the Japanese economy has appeared to re-couple with the world and regional business cycles in the recent period.
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