Publication Type

Journal Article

Version

publishedVersion

Publication Date

10-2016

Abstract

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.

Keywords

Business cycle co-movement, trade integration, inter-industry trade, intra-industry trade, exchange rate co-movement, East Asia

Discipline

Economics

Research Areas

International Economics

Publication

Singapore Economic Review

Volume

62

Issue

3

First Page

703

Last Page

719

ISSN

0217-5908

Identifier

10.1142/S0217590818400064

Publisher

World Scientific Publishing

Additional URL

https://doi.org/10.1142/S0217590818400064

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