Data from Okinawa's monetary union with the United States in 1958 and with Japan in 1972 are used to obtain a quantitative indication of how monetary union might affect the behavior of nominal and real shocks across two economies. With monetary union, the variance of the real exchange rate between two economies declines, and their business cycle linkage becomes stronger. A VAR analysis of output and price data for Okinawa and Japan further indicates that the contribution of asymmetric nominal shocks in business cycles becomes smaller. Monetary union thus seems to facilitate both nominal and real convergence.

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