Integration and Fluctuations

This paper analyzes the impact of global integration on the dynamics of economic growth and business cycles in the emerging economies of Middle East and North Africa (MENA) and Asia. In particular, the paper examines the evolution of structural characteristics, growth dynamics, and business cycle properties of these countries during the 1960-2000 period. Although both groups of countries became more open and were able to diversify their industrial structures and export bases over time, the MENA countries lagged behind the Asian economies in both trade integration and the extent of diversification of exports during the globalization period (1986-2000). Although economic growth slowed in both groups during the period of globalization, the extent of the slowdown was much sharper in the MENA countries. Moreover, business cycle fluctuations in the MENA countries were much more volatile than in the Asian economies. In addition, although both groups of countries witnessed a moderation in the amplitude of macroeconomic fluctuations during the globalization period, the decline in the volatility of cyclical fluctuations in the MENA countries was relatively small, partially because of the inability of these countries to utilize the benefits of global integration.