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

2014 ◽  
Author(s):  
Ayako Saiki ◽  
Sunghyun Henry Kim
Keyword(s):  
Business Cycle ◽  
East Asia ◽  
Trade Integration ◽  
Business Cycle Synchronization ◽  
Vertical Trade

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 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

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.

Economic Integration and Business Cycle Synchronization in Asia

2013 ◽  
Vol 12 (1) ◽  
pp. 76-99 ◽  
Author(s):  
Chi Gong ◽  
Soyoung Kim
Keyword(s):  
Business Cycle ◽  
Economic Integration ◽  
Regional Integration ◽  
Financial Integration ◽  
Trade Integration ◽  
Business Cycle Synchronization ◽  
Empirical Results ◽  
Positive Effects ◽  
Negative Effect ◽  
Positive Effect

This paper examines the effects of internal (or regional) vs. external (inter-regional) integration and of trade vs. financial integration on regional business cycle synchronization in Asia. The empirical results show the following: (1) similar and strong common external linkages have significant positive effects on regional business cycle synchronization; (2) after controlling for external linkages, internal trade integration has a positive effect on regional business cycle synchronization but internal financial integration has a negative effect; and (3) the measures of external linkages, particularly the measure of external financial linkages, are more important than those of internal linkages in explaining regional business cycle co-movements.

Economic Integration and Changes in the Business Cycle in East Asia: Is the Region Decoupling from the Rest of the World?

2009 ◽  
Vol 8 (1) ◽  
pp. 107-140 ◽  
Author(s):  
Yung Chul Park ◽  
Kwanho Shin
Keyword(s):  
United States ◽  
Business Cycle ◽  
East Asia ◽  
Regional Integration ◽  
Financial Integration ◽  
The United States ◽  
Trade Integration ◽  
Global Integration ◽  
Trade Relations ◽  
The Business Cycle

Countries in East Asia (EA) have made a great deal of progress in integrating their economies since the early 1990s. There has been a sustained increase in intra-regional trade in EA. On finance, however, regional financial integration has been lagging behind trade integration and EA has reached out to global financial markets to effect deeper global integration. The purpose of this paper is to analyze the effects of intra-regional and extra-regional financial integration on changes in the pattern of EA's business cycle since 1990 to see whether there is any ground for “decoupling” of EA from the United States and the EU. On trade relations, the empirical results show that deepening trade integration contributes to more synchronized output movements among EA countries. There is also evidence that financial integration enhances more synchronization of output, but because its impact is not strong, the extra-regional integration does not necessarily dispute the prediction that EA's output movement has become more idiosyncratic than before, and therefore less closely tied with that of the United States.

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