Asian Business Cycle Synchronisation
This paper develops a multi-level structural factor model to study international output comovement and its underlying driving forces. Our method combines a structural VAR with a multi-level factor model, which helps us understand the economic meaning of the estimated factors. Using quarterly data of real GDP growth covering nine emerging Asian economies and G-7 countries, we estimate a global supply factor, a global demand factor, and group supply and demand factors for each group of the economies. We find that, while the role of the global factors has intensified over the past fifteen years for most of the economies, output fluctuations in Asia have remained less synchronised with the global factor than those in the industrial countries. The Asian regional factors have become increasingly important in tightening the interdependence within the region over time. Thus while emerging Asian economies cannot "decouple" completely from the advanced economies, they have nonetheless sustained a strong independent cycle among themselves. We also find that synchronised supply shocks contributed more to the observed synchronisation in output fluctuations among the Asian economies than demand shocks. This points to the role of productivity enhancement through vertical trade integration, rather than dependence on external demand, as the primary source of business cycle synchronisation in emerging Asia.
|Date of creation:||Feb 2011|
|Contact details of provider:|| Postal: 55th Floor , Two International Finance Centre , 8 Finance Street , Central, Hong Kong|
Phone: (852)2878 1978
Fax: (852)2878 7006
Web page: http://www.hkimr.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Frankel, Jeffrey A & Rose, Andrew K, 1996.
"The Endogeneity of the Optimum Currency Area Criteria,"
CEPR Discussion Papers
1473, C.E.P.R. Discussion Papers.
- Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
- Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc.
- Allegret, Jean-Pierre & Essaadi, Essahbi, 2011.
"Business cycles synchronization in East Asian economy: Evidences from time-varying coherence study,"
Elsevier, vol. 28(1-2), pages 351-365, January.
- Allegret, Jean-Pierre & Essaadi, Essahbi, 2011. "Business cycles synchronization in East Asian economy: Evidences from time-varying coherence study," Economic Modelling, Elsevier, vol. 28(1), pages 351-365.
- Jean-Pierre Allegret & Essahbi Essaadi, 2011. "Business cycles synchronization in East Asian economy: evidences from time-varying coherence study," Post-Print halshs-00566116, HAL.
- Canova, Fabio & Ciccarelli, Matteo & Ortega, Eva, 2004.
"Similarities and Convergence in G7 Cycles,"
CEPR Discussion Papers
4534, C.E.P.R. Discussion Papers.
- Fabio Canova & Matteo Ciccarelli & Eva Ortega, 2004. "Similarities and convergence in G-7 cycles," Working Papers 0404, Banco de España;Working Papers Homepage.
- Canova, Fabio & Ciccarelli, Matteo & Ortega, Eva, 2004. "Similarities and convergence in G-7 cycles," Working Paper Series 0312, European Central Bank.
- Fabio Canova & Matteo Ciccarelli & Eva Ortega, 2003. "Similarities and convergence in G-7 cycles," Economics Working Papers 924, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2004.
- Eric Girardin, 2005. "Growth-cycle features of East Asian countries: are they similar?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(2), pages 143-156.
- Hans Genberg & Pierre L. Siklos, 2009.
"Revisiting the Shocking Aspects of Asian Monetary Unification,"
192009, Hong Kong Institute for Monetary Research.
- Genberg, Hans & Siklos, Pierre L., 2010. "Revisiting the shocking aspects of Asian monetary unification," Journal of Asian Economics, Elsevier, vol. 21(5), pages 445-455, October.
- Andrei A Levchenko & Julian Di Giovanni, 2009. "Putting the Parts Together; Trade, Vertical Linkages, and Business Cycle Comovement," IMF Working Papers 09/181, International Monetary Fund.
- Kim, Soyoung & Lee, Jong-Wha & Park, Cyn-Young, 2009.
"Emerging Asia: Decoupling or Recoupling,"
Working Papers on Regional Economic Integration
31, Asian Development Bank.
- Dong He & Wenlang Zhang, 2008.
"How Dependent is the Chinese Economy on Exports and in What Sense has its Growth been Export-led?,"
0814, Hong Kong Monetary Authority.
- He, Dong & Zhang, Wenlang, 2010. "How dependent is the Chinese economy on exports and in what sense has its growth been export-led?," Journal of Asian Economics, Elsevier, vol. 21(1), pages 87-104, February.
- Hiroshi Fujiki & nd Akiko Terada-Hagiwara, 2007.
"Financial Integration in East Asia,"
IMES Discussion Paper Series
07-E-12, Institute for Monetary and Economic Studies, Bank of Japan.
- Dong He & Lillian Cheung & Jian Chang, 2007. "Sense and Nonsense on Asia's Export Dependency and The Decoupling Thesis," Working Papers 0703, Hong Kong Monetary Authority.
- Dan Andrews & Marion Kohler, 2005. "International Business Cycle Co-movements through Time," RBA Annual Conference Volume, in: Christopher Kent & David Norman (ed.), The Changing Nature of the Business Cycle Reserve Bank of Australia.
- Jean Imbs, 2003. "Trade, Finance, Specialization, and Synchronization," IMF Working Papers 03/81, International Monetary Fund.
- Imbs, Jean, 2004.
"The Real Effects of Financial Integration,"
CEPR Discussion Papers
4335, C.E.P.R. Discussion Papers.
- M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2003. "International Business Cycles: World, Region, and Country-Specific Factors," American Economic Review, American Economic Association, vol. 93(4), pages 1216-1239, September.
- Ng, Eric C.Y., 2010. "Production fragmentation and business-cycle comovement," Journal of International Economics, Elsevier, vol. 82(1), pages 1-14, September.
- Amengual, Dante & Watson, Mark W., 2007. "Consistent Estimation of the Number of Dynamic Factors in a Large N and T Panel," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 91-96, January.
- By Norman Loayza & Humberto Lopez & Angel Ubide, 2001. "Comovements and Sectoral Interdependence: Evidence for Latin America, East Asia, and Europe," IMF Staff Papers, Palgrave Macmillan, vol. 48(2), pages 1-7.
- Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2004.
"Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach,"
NBER Working Papers
10220, National Bureau of Economic Research, Inc.
- Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2004. "Measuring the effects of monetary policy: a factor-augmented vector autoregressive (FAVAR) approach," Finance and Economics Discussion Series 2004-03, Board of Governors of the Federal Reserve System (U.S.).
- Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
- Hans Genberg & Dong He, 2007. "Monetary and Financial Cooperation among Central Banks in East Asia and the Pacific," Working Papers 0715, Hong Kong Monetary Authority.
When requesting a correction, please mention this item's handle: RePEc:hkm:wpaper:062011. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (HKIMR)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.