A study on the International Transmission of Economic Disturbances under Different Exchange Rate Regimes

This research has investigated important but still arguable hypotheses regarding the international transmission of economic disturbances. After the move to a floating exchange regime, it was commonly believed that the greater flexibility of exchange rates under a floating regime would insulate domestic economy from the influence of foreign shocks. Empirical results show the interdependencies between the U.S. and Japanese economies. And, these results provide evidence that flexible exchange rate regime has not in general insulated Japanese economies from foreign influence, since general results obtained here show that Japanese economy was still influenced by the U.S. innovations over the flexible rate period.