To control for product quality and exchange rate effects, we use the Japanese regional data to study the Penn effect – the positive relationship between price and income levels. Comparable with the evidence from international data, the Penn effect is significant in the Japanese prefectural...

This study suggests that some empirical findings against money-output causality can be the consequence of ignoring autoregressive conditional heteroskedastic (ARCH) errors. Monte Carlo results confirm that ARCH effects drastically reduce the power of the standard causality test. The maximum...

Using annual data on nine manufacturing sectors of eighteen OECD countries, the article studies the implications of market structure for cross-country relative price variability. It is found that, in accordance with predictions from a standard markup pricing model, reductions in market...

The debate on renminbi (RMB) revaluation has not subsided, despite the policy change announced by the Chinese authorities in July 2005. In this chapter, we show that the evidence of RMB undervaluation may not be as strong as it appears. Specifically, depending on the method used, the evidence...

The linkages between the People's Republic of China and the other Chinese economies of Hong Kong and Taiwan are assessed, and compared against the linkages with Japan and the US. We first characterize the time series behavior of three criteria of integration, namely real interest parity,...

The status of real and financial integration of China, Hong Kong, and Taiwan is investigated using monthly data on one-month interbank rates, exchange rates, and prices. Specifically, the degree of integration is assessed based on the empirical validity of real interest parity, uncovered...