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The myth of decoupling

  • Wälti, Sébastien

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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File URL: https://mpra.ub.uni-muenchen.de/20870/1/MPRA_paper_20870.pdf
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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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