Effects of U.S. Inflation on Hong Kong and Singapore

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractStandard economic models predict that the choice of an exchange rate regime has important implications for the interdependency of national monetary policies, which is sometimes measured by the degree of inflation transmission across borders. In this paper, we examine how inflation rates in two small open economies, namely Hong Kong and Singapore, interact with those in the U.S. It is found that the price levels in these three economies are cointegrated. Thus, a vector error correction model is used to study the inflation dynamics. It is found that Hong Kong and Singapore inflation rates, but not the U.S. one, respond to the error correction term. Compared with Singapore, the Hong Kong inflation rate is more responsive to U.S. price shocks. The different responses to U.S. price shocks are consistent with the difference in exchange rate regimes adopted by the two economies.JEL Classification: E31, F42.

Does Inflation in China Affect the United States and Japan?

“…Although not emphasized in the media, this result should not be surprising, as China's imports from the United States have been growing strongly for more than a decade. The finding that inflation developments in the United States affect China (which has a stable exchange rate against the dollar for a significant part of the sample) is also consistent with the findings of Crowder (1996) and Cheung and Yuen (2002) that during the fixed exchange rate period, inflation was transmitted from the reserve country (the United States) to the other countries.…”

“…In particular, during the Bretton Woods period, inflation was transmitted from the reserve currency nation to the rest of the world, while after this period, inflation was transmitted from all countries in the sample. Cheung and Yuen (2002) find that United States inflation has a strong impact on inflation in Hong Kong SAR and a much milder impact on inflation in Singapore. Bergin (2003), on the other hand, finds that foreign prices have little impact on the Australian economy.…”

Inflation Transmission in the EMU: A Markov-Switching VECM Analysis

“…Generally, they find a broad linkage of inflation among G-7 countries for the period 1973-2003. Cheung and Yuen (2002), who assess inflation dynamics across the U.S., Hong Kong and Singapore, find evidence for the inflation rates in the small economy being caused by the large economy.…”

The dynamics of housing returns in Singapore: How important are the international transmission mechanisms?

“…On the other hand, international exposure in trade and financial services may imply higher volatility in economic growth, and even social conflict in some cases. 15 Tselichtchev and Debroux This quotation highlights a few facts. First, Singapore has experienced financial crises and its economy is still growing.…”

“…Among others, see Bossaerts and Hillion (1999), David and Fagan (1997) 3 Among others, see Tse and Leung (2002), Devereux (2003). 4 Among others, see Abeysinghe (1998), Cheung and Yuen (2002), Mackowiak (2007), Meng (2003). 5 "Balance sheet channel" includes "maturity mismatch risk," "currency mismatch risk," "capital strcture mismatch risk," etc.…”