Yen Bloc or Koala Bloc? Evidence of the Relevance of Australia to East Asian Economies

As the strength of the Japanese economy grew during the 1980s, many studies examined the integration between currencies in the region. Several studies found evidence for a "yen bloc", a significant and strengthening relationship between the Japanese yen and other regional currencies due to trade, direct and indirect investment by Japan in the region. However, few studies compared the role of Japan with another influential regional economy, Australia. On closer investigation it appears that the Australian dollar has a similar role in the East Asian region, and the linkages between the dollar and the Asian currencies show as much support for a "koala bloc" as a "yen bloc". In fact, as the 20th Century drew to a close, the Australian dollar appears to be a regional currency of at least equal importance to the yen. With the ever-increasing economic participation of Australia in Asia, and considering the economic difficulties facing Japan, it is a trend that can be expected to continue.