scholarly journals Trade Integration and Business Cycle Synchronization in East Asia

2003 ◽  
Vol 2 (3) ◽  
pp. 1-20 ◽  
Author(s):  
Kwanho Shin ◽  
Yunjong Wang
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
East Asia ◽  
East Asian ◽  
Trade Integration ◽  
Asian Countries ◽  
Business Cycle Synchronization ◽  
Industry Trade ◽  
Asian Economies ◽  
Trading Partners

As trade integration deepens in East Asia, closer links among the business cycles of East Asian countries can be expected. Theoretically, however, increased trade could lead to either closer or looser business cycles across trading partners. This paper seeks to understand how the business cycles of 12 Asian economies have been influenced by increased trade among them. It finds that the increasing trade itself is not necessarily associated with an increased synchronization of their business cycles. Intra-industry trade, rather than inter-industry trade or the volume of trade itself, is the major channel through which their business cycles become synchronized. This result has important implications for the prospects for a unified currency in the region.

TRADE INTENSITY AND BUSINESS CYCLE SYNCHRONIZATION: THE CASE OF EAST ASIAN COUNTRIES

2008 ◽  
Vol 53 (02) ◽  
pp. 279-292 ◽  
Author(s):  
PRADUMNA B. RANA
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
East Asia ◽  
East Asian ◽  
Correlation Equation ◽  
Trade Intensity ◽  
Asian Countries ◽  
Single Currency ◽  
Crisis Period ◽  
Industry Trade

This paper examines whether increasing trade intensities among East Asian countries have led to a synchronization of business cycles. It extends the work of Shin and Wang (2004) in two ways: by improving the specification of their business cycle correlation equation and by extending the sample to cover the post-crisis period. The study finds that intra-industry trade, rather than inter-industry trade, is the major factor in explaining business cycle co-movements in East Asia. This result has important implications for the prospects of introducing a single currency in the region.

Business Cycle Synchronization and Vertical Trade Integration: A Case Study of the Eurozone and East Asia

2018 ◽  
Vol 18 (1) ◽  
pp. 20170101
Author(s):  
Ayako Saiki
Keyword(s):  
Business Cycle ◽  
East Asia ◽  
Trade Integration ◽  
Business Cycle Synchronization ◽  
Industry Trade ◽  
Euro Adoption ◽  
Different Types ◽  
Government Initiative ◽  
Product Segmentation ◽  
The Impact

Business cycle synchronization is one of the crucial conditions for a currency union to be successful. Frankel and Rose (1998) argued that increased trade after euro adoption would increase business cycle synchronization ex-ante. However, the fallout of the Eurozone forcefully demonstrated that their optimistic prediction did not turn out to be true. One thing Frankel and Rose (1998) did not examine is how different types of trade (inter vs. intra, vertical vs. horizontal, etc.) intensify/dampens business cycle synchronization. In this light, this paper empirically examines how different types of trade affect business cycle synchronization in what way. This study takes two major economic blocs that have been going under rapid economic integrations: The original Eurozone members and East Asia – integration of former mainly developing by European government initiative and the latter naturally forming by the global supply chain and associated product segmentation. Comparing these two very different economic blocs with very different factor endowment structures would give us a more convincing answer to how different types of trade can influence business cycle synchronization differently. Our key finding is that, on the contrary to Frankel and Rose (1998) , the impact of increased trade intensity on business cycle co-movement is ambiguous. The impact of trade on business cycle synchronization depends on types of trade. Intra-industry trade, especially vertical intra-industry trade which is rapidly growing in East Asia, has a strong positive effect on business cycle synchronization while inter-industry trade does not.

scholarly journals Exchange Rates Under The East Asia Dollar Standard: The Future Of East Asian Economies

2011 ◽  
Vol 6 (3) ◽  
Author(s):  
Ordean Olson
Keyword(s):  
Exchange Rate ◽  
Business Cycle ◽  
East Asia ◽  
East Asian ◽  
Asian Countries ◽  
Economic Stability ◽  
Dollar Exchange Rate ◽  
Asian Economies ◽  
The Business Cycle ◽  
East Asian Economies

The effects of fluctuations in the yen/dollar exchange rate on the business cycle of the smaller East Asian economies are examined in this paper. The cointegration error-correction model is employed to examine the nature of the interrelationship between the yen/dollar exchange rate and the economic stability of the East Asian countries. The empirical results reveal strong and lasting effects of changes in the yen/dollar exchange rate on the economic income and exchange rate stability of the East Asian countries. The results also indicate that stabilizing the yen/dollar exchange rate with the East Asian business cycle would benefit Japan as well as the economies of East Asia.

scholarly journals Synchronization of business cycles in Poland and the euro zone – the wavelet domain approach

Equilibrium ◽  
2009 ◽  
Vol 3 (2) ◽  
pp. 9-25
Author(s):  
Joanna Bruzda
Keyword(s):  
Wavelet Analysis ◽  
Business Cycles ◽  
Business Cycle ◽  
Business Cycle Synchronization ◽  
Euro Zone ◽  
Frequency Domains ◽  
Trading Partners ◽  
Time Varying Frequency ◽  
Frequency Components ◽  
One Year

In the paper time-scale (wavelet) analysis is suggested as a tool for examining business cycle synchronization. Wavelet analysis enables to examine stochastic processes simultaneously in the time and frequency domains. Due to this the approach makes it possible to investigate time varying frequency components of economic processes. Among such components one can distinguish cycles of length over one year up to twelve years, which are known as business cycles (see Burns and Mitchell, 1946). In the paper this approach is illustrated with an examination of business cycle synchronization between Poland and its main trading partners in the euro zone: Germany, France, Italy and the Netherlands. The empirical analysis confirms the stylized facts on the Polish business cycle: its length, similarity with the German cycle and the lead-lag relations with national cycles in the euro zone. Besides, verification of the OCA endogenity hypothesis has been undertaken, but the results obtained are ambiguous.

Trade intensity and business cycle synchronization

2018 ◽  
Vol 22 (1) ◽  
pp. 36-49 ◽  
Author(s):  
Jong Kyou Jeon
Keyword(s):  
Business Cycle ◽  
Value Added ◽  
Trade Intensity ◽  
Double Counting ◽  
Trade Integration ◽  
Asian Countries ◽  
Business Cycle Synchronization ◽  
Trade Data ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between trade integration and intra-regional business cycle synchronization using value-added trade data. Most empirical studies analyzing the relationship between trade integration and business cycle synchronization use gross trade data which suffer from double-counting. Double-counting distorts the empirical results on the estimated relationship between trade integration and business cycle synchronization. This paper explores the relationship using value-added trade data to be free from distortions caused by double-counting. Design/methodology/approach Gross trade data on exports and imports are decomposed into sub-categories following Koopman et al. (2014). Then, value-added data on exports and imports without double-counted terms are built to measure value-added bilateral trade intensity and value-added intra-industry trade intensity. Using this value-added trade intensities, the author run panel regressions for Europe and East Asian countries to examine how value-added trade intensities are correlated with output co-movements. Findings The paper finds that for European countries, the positive association between trade and business cycle co-movements is more evidently observed and the role of intra-industry trade increasing the business cycle synchronization is also more clearly revealed by value-added trade data. On the other hand, for East Asian countries, value-added trade data reveal that it is very uncertain whether increased trade contributes to stronger synchronization of business cycles and intra-industry trade is truly the major factor which deepens the business cycle co-movements. Research limitations/implications First, the paper examines the relationship only by running static panel regression. There is a need to employ different methodologies such as instrumental variable regression or dynamic panel regression. Second, financial integration and policy coordination within a region are also other relevant factors which influence the intra-regional business cycle synchronization. There is a need to examine the relationship using value-added trade data with the variables measuring the degree of financial integration and policy coordination. Third, value-added trade data used in this paper has limited coverage of East Asian countries. There is also a need to extend the value-added data set to cover more countries and industries. Originality/value Most empirical literature studying the relationship between trade integration and business cycle synchronization rely on gross trade data. This paper would be the first attempt to study the relationship using value-added trade data. Duval et al. (2014) also use value-added data, but their value-added data are not supported by a solid accounting framework which decomposes a country’s gross exports into various value-added components by source and additional double-counted terms. Value-added data in this paper computed based on Koopman et al. (2014) are the total domestic value exports that are ultimately consumed abroad via final and intermediate exports. The author believes that value-added data in this paper are most relevant in estimating the relationship between trade integration and business cycle synchronization.

CATALYST OF BUSINESS CYCLE SYNCHRONIZATION IN EAST ASIA

2016 ◽  
Vol 62 (03) ◽  
pp. 703-719
Author(s):  
HUI-YING SNG ◽  
LIYU DOU ◽  
PRADUMNA BICKRAM RANA
Keyword(s):  
Exchange Rate ◽  
Business Cycle ◽  
East Asia ◽  
The United States ◽  
Trade Intensity ◽  
Business Cycle Synchronization ◽  
Industry Trade ◽  
Essential Question ◽  
The Us ◽  
The Exchange Rate

The essential question this paper seeks to answer is whether the business cycle co-movement in East Asia are fostered by internal bilateral trade within the region, specifically, intra-industry trade or by external forces like the influence of the world’s largest economy, namely, the United States. This paper examines the extent and robustness of the relationship between trade intensity and business cycle synchronization for nine East Asian countries in the period 1965–2008. Unlike previous studies which assume away the region’s concurrent connection with the rest of the world, in our regressions we control for both the US effect and the exchange rate co-movement in the region. We find that the coefficient estimates for intra-industry trade intensity remain robust and significant even after controlling for the US effect and the exchange rate co-movement. The findings confirm that regional intra-industry trade fosters business cycle correlations among countries in East Asia.

Vertical Intra-Industry Trade and Economic Integration in East Asia

2007 ◽  
Vol 6 (1) ◽  
pp. 26-39 ◽  
Author(s):  
Ryuhei Wakasugi
Keyword(s):  
East Asia ◽  
Economic Integration ◽  
East Asian ◽  
Gravity Equation ◽  
Asian Countries ◽  
Trade Expansion ◽  
Industry Trade ◽  
Fragmentation Of Production ◽  
The Growth Of Economy ◽  
The Eu

It is notable that the trade in East Asian countries has increased more than proportionately to the growth of economy. This paper tests the hypothesis that the recent trade expansion is induced by development of international fragmentation of production. This paper constructs an index of vertical intra-industry trade (VIIT) to measure the fragmentation of production, and finds that the share of VIIT has been rising in East Asia as well as in NAFTA and the EU using the gravity equation. It also establishes that a rising share of VIIT is an important factor in explaining the recent expansion of trade with East Asia. The results suggest that an agreement to remove and harmonize institutional impediments among East Asian countries is important for further expansion of trade within the region.

scholarly journals The Effect of Trade Integration on Business Cycle Synchronization in East Asia

2020 ◽  
Vol 7 (8) ◽  
pp. 225-231
Author(s):  
Vinh Thi Hong NGUYEN ◽  
◽  
Thuy Thi Thanh HOANG ◽  
Sang Minh NGUYEN
Keyword(s):  
Business Cycle ◽  
East Asia ◽  
Trade Integration ◽  
Business Cycle Synchronization
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