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Developing Country Business Cycles: Characterising the Cycle

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  • Rachel Male

    ()
    (Queen Mary, University of London)

Abstract

Classical business cycles, following Burns and Mitchell (1946), can be defined as the sequential pattern of expansions and contractions in aggregate economic activity. Recently, Harding and Pagan (2002, 2006) have provided an econometric toolkit for the analysis of these cycles, and this has resulted in a recent surge in researchers using these methods to analyse developing country business cycles. However, the existing literature consists of diminutive samples and the majority fail to consider the statistical significance of the concordance statistics. To address this shortfall, this paper examines the business cycle characteristics and synchronicity for thirty-two developing countries. Furthermore, the US, the UK and Japan are included; this provides benchmarks upon which to compare the characteristics of the developing country cycles and also to examine the degree of synchronisation between developed and developing countries. Significantly, this research reveals that business cycles of developing countries are not, as previously believed, significantly shorter than those of the developed countries. However, the amplitude of both expansion and contraction phases tends to be greater in the developing countries. Furthermore a clear relationship between the timing of business cycle fluctuations and periods of significant regional crises, such as the Asian Financial Crisis, is exhibited. However, the more specific timing of the onset of these fluctuations appears to be determined by country-specific factors. Moreover, there are no clear patterns of concordance either within regions or between developed and developing country business cycles.

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Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 663.

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Date of creation: May 2010
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Handle: RePEc:qmw:qmwecw:wp663

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Keywords: Classical business cycle; Turning points; Synchronisation; Concordance; Contagion; Developing economies;

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References

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  1. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, May.
  2. Rand, John & Tarp, Finn, 2002. "Business Cycles in Developing Countries: Are They Different?," World Development, Elsevier, vol. 30(12), pages 2071-2088, December.
  3. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
  4. Stan du Plessis, 2006. "Business Cycles in Emerging market Economies: A New View of the Stylised Facts," Working Papers 02/2006, Stellenbosch University, Department of Economics.
  5. Calderon, Cesar & Fuentes, Rodrigo, 2010. "Characterizing the business cycles of emerging economies," Policy Research Working Paper Series 5343, The World Bank.
  6. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini & Cedric Tille, 1999. "Competitive Devaluations: A Welfare-Based Approach," NBER Working Papers 6889, National Bureau of Economic Research, Inc.
  7. Jeffrey A. Frankel & Nouriel Roubini, 2001. "The Role of Industrial Country Policies in Emerging Market Crises," NBER Working Papers 8634, National Bureau of Economic Research, Inc.
  8. Mohanty, Jaya & Singh, Bhupal & Jain, Rajeev, 2003. "Business cycles and leading indicators of industrial activity in India," MPRA Paper 12149, University Library of Munich, Germany.
  9. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May.
  10. Enrique G. Mendoza & Katherine A. Smith, 2002. "Margin Calls, Trading Costs, and Asset Prices in Emerging Markets: The Finanical Mechanics of the 'Sudden Stop' Phenomenon," NBER Working Papers 9286, National Bureau of Economic Research, Inc.
  11. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, May.
  12. Adrian Pagan & Don Harding, 2005. "A suggested framework for classifying the modes of cycle research," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 151-159.
  13. Gerhard Bry & Charlotte Boschan, 1971. "Foreword to "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs"," NBER Chapters, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages -1 National Bureau of Economic Research, Inc.
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Cited by:
  1. Esteban PeÌrez Caldentey & Daniel Titelman & Pablo Carvallo, 2014. "Weak Expansions: A Distinctive Feature of the Business Cycle in Latin America and the Caribbean," World Economic Review, World Economics Association, vol. 2014(3), pages 69, February.
  2. Sumru Altug & Fabio Canova, 2012. "Do institutions and culture matter for business cycles?," Economics Working Papers 1314, Department of Economics and Business, Universitat Pompeu Fabra.
  3. HIRATA Hideaki & Ayhan KOSE & Christopher OTROK, 2013. "Regionalization vs. Globalization," Discussion papers 13004, Research Institute of Economy, Trade and Industry (RIETI).
  4. Rachel Male, 2010. "Developing Country Business Cycles: Revisiting the Stylised Facts," Working Papers 664, Queen Mary, University of London, School of Economics and Finance.
  5. Harun Alp & Yusuf Soner Baskaya & Mustafa Kilinc & Canan Yuksel, 2012. "Stylized Facts for Business Cycles in Turkey," Working Papers 1202, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  6. Esteban Perez Caldentey & Matias Vernengo, 2013. "Wage and Profit-led Growth: The Limits to Neo-Kaleckian Models and a Kaldorian Proposal," Economics Working Paper Archive wp_775, Levy Economics Institute.
  7. Emilio Espino & Julian Kozlowski & Juan M. Sánchez, 2013. "Regionalization vs. globalization," Working Papers 2013-002, Federal Reserve Bank of St. Louis.

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