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The myth of decoupling

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  • Wälti, Sébastien

Abstract

This paper casts light on the ongoing debate about whether emerging markets have decoupled from advanced economies. The proponents of the decoupling hypothesis argue that emerging markets have made significant progress in reducing external vulnerabilities, strengthening domestic policy frameworks, and achieving stronger domestic demand growth, thereby leading to lower business cycle comovements with advanced economies. This view runs against extensive empirical evidence showing that globalization, namely rising trade and financial integration, raises business cycle synchronisation. We find that decoupling is a myth: business cycle synchronicity between emerging markets and advanced economies has generally not declined in recent years.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20870.

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Date of creation: Feb 2009
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Handle: RePEc:pra:mprapa:20870

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Keywords: business cycle; synchronisation; globalisation; decoupling; emerging markets;

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Citations

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Cited by:
  1. Daniela Gabor, 2011. "Paradigm shift? A critique of the IMF’s new approach to capital controls," Working Papers 1109, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  2. Levy Yeyati, Eduardo & Williams, Tomas, 2012. "Emerging economies in the 2000s: Real decoupling and financial recoupling," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2102-2126.
  3. Felices, Guillermo & Wieladek, Tomasz, 2012. "Are emerging market indicators of vulnerability to financial crises decoupling from global factors?," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 321-331.
  4. Fabio Canova & Matteo Ciccarelli, 2011. "ClubMed Cyclical Fluctuations in the Mediterranean Basin," Working Papers 532, Barcelona Graduate School of Economics.
  5. Kucera, David & Roncolato, Leanne & von Uexkull, Erik, 2010. "Trade contraction in the global crisis : employment and inequality effects in India and South Africa," ILO Working Papers 459401, International Labour Organization.
  6. Nenad Stanisic, 2013. "Convergence between the business cycles of Central and Eastern European countries and the Euro area," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 13(1), pages 63-74, July.
  7. Basher, Syed Abul, 2010. "Has the non-oil sector decoupled from oil sector? A case study of Gulf Cooperation Council Countries," MPRA Paper 21059, University Library of Munich, Germany.

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