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.

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

Author
Type
Series
Subjects
  • Economics
  • Finance sector development
  • Regional cooperation and integration
Countries/Economies
  • China, People's Republic of
  • Hong Kong, China
  • Korea, Republic of
  • Mongolia
  • Taipei,China

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