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Trans-Pacific Economic Relations and US-China Business Cycles : Convergence within Asia versus US Economic Leadership

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  • Andrew Hughes Hallett

    (Asian Development Bank Institute (ADBI))

  • Christian Richter

Abstract

This paper tests the hypothesis that the links and leadership/dependency relationships between the People’s Republic of China (PRC), the United States (US), and the other large Asian economies have changed over the past 20 years with the industrialization of the PRC economy. We use time-varying spectral methods to decompose the links between seven advanced Asian economies and the US. We find : (a) the links with the US have been weakening, while those within a bloc based on the PRC have strengthened; (b) that this is not new—it has been happening since the 1980s, but has been partly reversed by the recent surge in trade; (c) that there are two blocs within the Asian economic area : one based on Japan and the Republic of Korea and the other on the PRC and her satellites; (d) that product composition is responsible for this division (and for some movement between the blocs); and (e) that the links between the PRC and the US are rather complex, with the US able to shape the cycles elsewhere through her control of monetary conditions, but the PRC able to control the size of the cycles at home and (to some extent) abroad.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 23244.

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Date of creation: Jun 2011
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Handle: RePEc:eab:develo:23244

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Keywords: dependency relationships; leadership relationships; the PRC; the US; Trans-Pacific Economic Relation; US-China Business Cycles;

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  1. Andrew Hughes Hallett, Christian R Richter, 2001. "Spectral Analysis as a Tool for Financial Policy: An Analysis of the Short-End of the British Term Structure," Computing in Economics and Finance 2001 127, Society for Computational Economics.
  2. Artis, Michael J & Zhang, Wenda, 1995. "International Business Cycles and the ERM: Is there a European Business Cycle?," CEPR Discussion Papers 1191, C.E.P.R. Discussion Papers.
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  7. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
  8. Tony Cavoli & Ramkishen S. Rajan, 2007. "Exploring the Case for Monetary Integration between the Chinese Mainland and Hong Kong," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(4), pages 17-34.
  9. Marianne Baxter & Michael Kouparitsas, 2004. "Determinants of business cycle comovement: a robust analysis," Working Paper Series WP-04-14, Federal Reserve Bank of Chicago.
  10. Canova, Fabio, 1998. "Detrending and business cycle facts: A user's guide," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 533-540, May.
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  13. Andrew Hughes Hallett & Christian Richter, 2009. "Economics in the Backyard: How Much Convergence is there between China and her Special Regions?," The World Economy, Wiley Blackwell, vol. 32(6), pages 819-861, 06.
  14. Evans, Paul & Karras, Georgios, 1996. "Convergence revisited," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 249-265, April.
  15. Vladimir Chaplygin & Andrew Hughes Hallett & Christian Richter, 2006. "Monetary integration in the ex-Soviet Union: A 'union of four'? ," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(1), pages 47-68, 03.
  16. Kwanho Shin & Chan-Hyun Sohn, 2006. "Trade and Financial Integration in East Asia: Effects on Co-movements," The World Economy, Wiley Blackwell, vol. 29(12), pages 1649-1669, December.
  17. Shin, Kwanho & Wang, Yunjong, 2004. "Trade integration and business cycle co-movements: the case of Korea with other Asian countries," Japan and the World Economy, Elsevier, vol. 16(2), pages 213-230, April.
  18. Robert Inklaar & Jakob de Haan, 2000. "Is there Really a European Business Cycle?," CESifo Working Paper Series 268, CESifo Group Munich.
  19. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  20. Kehoe, Patrick, 2005. "Comment on: "Determinants of business cycle comovement: a robust analysis"," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 159-162, January.
  21. Kalemli-Ozcan, Sebnem & Sorensen, Bent E. & Yosha, Oved, 2001. "Economic integration, industrial specialization, and the asymmetry of macroeconomic fluctuations," Journal of International Economics, Elsevier, vol. 55(1), pages 107-137, October.
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