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Business cycle synchronisation in East Asia

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  • Moneta, Fabio
  • Rüffer, Rasmus
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    Abstract

    Against the background of the rapid inter- and intraregional integration of East Asia, we examine the extent and nature of synchronisation of business cycles in the region. We estimate various specifications of a dynamic common factor model for output growth of ten East Asian countries. A significant common factor is shared by all Asian countries considered, except China and Japan. The degree of synchronisation has fluctuated over time, with an upward trend particularly evident for the newly industrialised countries. Synchronisation appears to mainly reflect strong export synchronisation, rather than common consumption or investment dynamics. Cross-country spill-over effects explain only a small part of the comovement in the region. More importantly, a number of exogenous factors, such as the price of oil and the JPY-USD exchange rate, play an important role in synchronising activity. In addition, economic linkages with Europe and North America may also have contributed to the observed synchronisation. JEL Classification: E30, F00

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    Bibliographic Info

    Paper provided by European Central Bank in its series Working Paper Series with number 0671.

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    Date of creation: Aug 2006
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    Handle: RePEc:ecb:ecbwps:20060671

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    Keywords: business cycles synchronisation; dynamic factor model; East Asia;

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    Cited by:
    1. Ludmila Fadejeva & Aleksejs Melihovs, 2008. "The Baltic States and Europe: Common Factors of Economic Activity," Working Papers 2008/03, Latvijas Banka.
    2. Hans Genberg & Pierre L. Siklos, 2009. "Revisiting the Shocking Aspects of Asian Monetary Unification," Working Papers 192009, Hong Kong Institute for Monetary Research.
    3. Changchun Hua & Douglas H. Brooks, 2010. "Asian Trade and Global Linkages," Working Papers id:3094, eSocialSciences.
    4. Moneta, Fabio & Rüffer, Rasmus, 2009. "Business cycle synchronisation in East Asia," Journal of Asian Economics, Elsevier, vol. 20(1), pages 1-12, January.

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