Trade Intensity and Business Cycle Synchronization: The Case of East Asia
Publication | June 2007
Intra-industry trade among East Asian countries, rather than inter-industry trade, is the major factor explaining business cycle co-movements in the region.
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This paper examines whether increasing trade intensity among East Asian countries has led to a synchronization of business cycles. It extends the work of Shin and Wang (2004) in two ways: by (i) improving the specification of their business cycle correlation equation, and (ii) extending the sample to cover the period after the Asian financial crisis. The study finds that intra-industry trade, rather than inter-industry trade, is the major factor explaining business cycle co-movements in East Asia, with important implications for the prospects for a single currency in the region.
Contents
- Introduction
- Trade Intensity and Business Cycle Synchronization
- Data and Statistical Trends
- The Regressions and Estimation Results
- Implications
- Appendix
Additional Details
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