Trade Integration and Business Cycle Synchronization in East Asia

40 Pages Posted: 11 Jun 2003

See all articles by Kwanho Shin

Kwanho Shin

Korea University

Yunjong Wang

SK Research Institute - Seoul Finance Center

Date Written: March 2003

Abstract

As trade integration deepens in East Asia, it is expected that there will be closer links in business cycles among East Asian countries.

Theoretically, however, increased trade can lead business cycles across trading partners to shift in either direction: while inter-industry trade resulting in higher specialization would induce less synchronization, intra-industry trade could overturn this tendency. By using the data for twelve Asian economies, this paper finds that intra-industry trade is the major channel through which business cycles become synchronized among Asian economies, although increased trade itself does not necessarily lead to close business cycle coherence. This result has important implications for the prospects of a currency union in the region.

Keywords: Monetary Union, East Asia, Trade Integration, Intra-industry Trade

JEL Classification: E32, F33, F15, F36, F41

Suggested Citation

Shin, Kwanho and Wang, Yunjong, Trade Integration and Business Cycle Synchronization in East Asia (March 2003). Available at SSRN: https://ssrn.com/abstract=395981 or http://dx.doi.org/10.2139/ssrn.395981

Kwanho Shin (Contact Author)

Korea University ( email )

1 Anam-dong 5 ka
Sunbuk-Ku, Department of Economics
Seoul 136-701
Korea
82-2-3290-2220 (Phone)
82-2-3290-2719 (Fax)

HOME PAGE: econ.korea.ac.kr/~khshin

Yunjong Wang

SK Research Institute - Seoul Finance Center ( email )

Seoul
Korea

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