Emerging Asia's Growth and Integration: How Autonomous are Business Cycles?

49 Pages Posted: 20 Jan 2007

See all articles by Rasmus Rueffer

Rasmus Rueffer

European Central Bank (ECB)

Marcelo Sanchez

European Central Bank (ECB)

Jian-Guang Shen

International Monetary Fund (IMF)

Date Written: January 2007

Abstract

Against the background of the rapid integration of emerging Asia into the global economy, this paper investigates the role of domestic and external factors in driving individual emerging economies in Asia. We estimate VAR models for ten countries over the period 1979Q1-2003Q4, controlling for external factors, and use sign restrictions to identify structural domestic shocks. Variance decompositions indicate that Asian emerging economies are to a large part driven by external developments, and even more so employing a more recent sample. We analyse to what extent structural domestic shocks exhibit a regional dimension by comparing shocks across countries using correlation and principal component analysis. The extent of regional co-movement between structural shocks is relatively limited. While the principal components analysis indicates a moderate increase in co-movement over time, the correlation analysis finds a decline. This may reflect a broadening of regional integration at the expense of bilateral economic ties.

Keywords: Economic integration, international business cycles, structural shocks sign restrictions

JEL Classification: F15, F02, F41

Suggested Citation

Rueffer, Rasmus and Sanchez, Marcelo and Shen, Jian-Guang, Emerging Asia's Growth and Integration: How Autonomous are Business Cycles? (January 2007). ECB Working Paper No. 715, Available at SSRN: https://ssrn.com/abstract=955769

Rasmus Rueffer (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 7087 (Phone)
+49 69 1344 6353 (Fax)

Marcelo Sanchez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Jian-Guang Shen

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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