Trade Integration and Business Cycle Synchronization : A Reappraisal with Focus on Asia

Author/Editor:

Romain A Duval ; Kevin C Cheng ; Kum Hwa Oh ; Richa Saraf ; Dulani Seneviratne

Publication Date:

April 3, 2014

Electronic Access:

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Summary:

This paper reexamines the relationship between trade integration and business cycle synchronization (BCS) using new value-added trade data for 63 advanced and emerging economies during 1995–2012. In a panel framework, we identify a strong positive impact of trade intensity on BCS—conditional on various controls, global common shocks and country-pair heterogeneity—that is absent when gross trade data are used. That effect is bigger in crisis times, pointing to trade as an important crisis propagation mechanism. Bilateral intra-industry trade and trade specialization correlation also appear to increase co-movement, indicating that not only the intensity but also the type of trade matters. Finally, we show that dependence on Chinese final demand in value-added terms amplifies the international spillovers and synchronizing impact of growth shocks in China.

Series:

Working Paper No. 14/52

Subject:

English

Publication Date:

April 3, 2014

ISBN/ISSN:

9781475522464/1018-5941

Stock No:

WPIEA2014052

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

46

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