INTERNATIONAL PRICE LINKAGE WITHIN A REGION - THE CASE OF EAST-ASIA

This paper investigates how ''prices'' in East Asian economies correla te with those in Japan and the United States, The analysis is particul arly noteworthy because although the East Asian economies are geograph ically close to Japan, their currencies have been tied more closely to the U.S. dollar. In this paper, we analyze two different types of ''p rices'': overall price levels in terms of the same currency and relati ve prices among different commodities. We demonstrate that overall pri ce levels in the East Asian economies are more closely related to thos e in the United States. However, the relative prices in East Asia, esp ecially those in Taiwan and Korea, are more closely correlated with th ose in Japan. These price correlation patterns are in marked contrast with those in other regions. (C) 1997 Academic Press.