Output Movements in East Asia: Is There a Regional Factor?

25 Pages Posted: 23 May 2008

Abstract

Using Lumsdaine and Prasad's (2003) methodology to construct a measure of the common component of industrial output fluctuations with time-varying weights, this study finds that there is a significant regional factor that explains the movement in industrial production output across countries in East Asia (ASEAN 5 + 3). The cumulated common component for East Asia has very distinct peaks and troughs, with turning points occurring about every three years. Shocks in 2000-2001, coinciding with the bursting of the IT bubble, appear to be very important as there is a very large decline in the common component of industrial production output, larger than that experienced during the 1997 Asian Financial Crisis. Similar to McKinnon and Schnabl's (2003) findings, the Japanese economy is important for the region as its industrial production output cycle has the largest weight in the construction of the cumulated common component for the region and appears to be the most similar to it. Nevertheless, China's asymmetry with the cumulated component for the region appears to have been beneficial for the region, especially in the most recent period.

Suggested Citation

Gochoco-Bautista, Maria Socorro, Output Movements in East Asia: Is There a Regional Factor?. World Economy, Vol. 31, Issue 6, pp. 738-762, June 2008, Available at SSRN: https://ssrn.com/abstract=1136497 or http://dx.doi.org/10.1111/j.1467-9701.2007.01064.x

Maria Socorro Gochoco-Bautista (Contact Author)

University of the Philippines, School of Economics ( email )

Quezon City, Diliman
Philippines

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