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Emerging Asia’s growth and integration - how autonomous are business cycles?

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Author Info
Rasmus Rüffer () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Marcelo Sánchez () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Jian-Guang Shen () (International Monetary Fund, 700 19th Street, N.W., Washington, D.C. 20431, USA.)
Abstract

Against the background of the rapid integration of emerging Asia into the global economy, this paper investigates the role of domestic and external factors in driving individual emerging economies in Asia. We estimate VAR models for ten countries over the period 1979Q1-2003Q4, controlling for external factors, and use sign restrictions to identify structural domestic shocks. Variance decompositions indicate that Asian emerging economies are to a large part driven by external developments, and even more so employing a more recent sample. We analyse to what extent structural domestic shocks exhibit a regional dimension by comparing shocks across countries using correlation and principal component analysis. The extent of regional co-movement between structural shocks is relatively limited. While the principal components analysis indicates a moderate increase in co-movement over time, the correlation analysis finds a decline. This may reflect a broadening of regional integration at the expense of bilateral economic ties. JEL Classification: F15, F02, F41.

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Paper provided by European Central Bank in its series Working Paper Series with number 715.

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Length: 47 pages
Date of creation: Jan 2007
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Handle: RePEc:ecb:ecbwps:20070715

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Keywords: Economic integration; international business cycles; structural shocks; sign restrictions.;

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  2. Olli Castrén & Chiara Osbat & Matthias Sydow, 2006. "What drives investors’ behaviour in different FX market segments? A VAR-based return decomposition analysis," Working Paper Series 706, European Central Bank. [Downloadable!]
  3. Sylvain Champonnois, 2006. "Comparing financial systems - a structural analysis," Working Paper Series 702, European Central Bank. [Downloadable!]
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  4. Bo Becker & Jagadeesh Sivadasan, 2006. "The effect of financial development on the investment-cash flow relationship - cross-country evidence from Europe," Working Paper Series 689, European Central Bank. [Downloadable!]
  5. Michael Fidora & Marcel Fratzscher & Christian Thimann, 2006. "Home bias in global bond and equity markets - the role of real exchange rate volatility," Working Paper Series 685, European Central Bank. [Downloadable!]
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  6. António Afonso & Pedro Gomes & Philipp Rother, 2006. "What “Hides” Behind Sovereign Debt Ratings?," Working Papers 2006/35, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
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  7. Luca Dedola & Stefano Neri, 2006. "What does a technology shock do? A VAR analysis with model-based sign restrictions," Temi di discussione (Economic working papers) 607, Bank of Italy, Economic Research Department. [Downloadable!]
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  8. Günter W. Beck & Kirstin Hubrich & Massimiliano Marcellino, 2006. "Regional inflation dynamics within and across euro area countries and a comparison with the US," Working Paper Series 681, European Central Bank. [Downloadable!]
  9. Ester Faia, 2006. "Optimal monetary policy rules with labor market frictions," Working Paper Series 698, European Central Bank. [Downloadable!]
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  10. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
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  11. Barry E. Jones & Livio Stracca, 2006. "Are money and consumption additively separable in the euro area? A non-parametric approach," Working Paper Series 704, European Central Bank. [Downloadable!]
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