Trade Integration and Business Cycle Synchronization: A Reappraisal with Focus on Asia
IMF Working Papers, April 3, 2014
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- Trade Integration and Business Cycle Synchronization: A Reappraisal with Focus on Asia
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Bibliographic details
- Authors: Romain A Duval, Kevin C Cheng, Kum Hwa Oh, Richa Saraf
- Published: April 3, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475522464.001
Research scope and data
- Sample: 63 advanced and emerging economies.
- Period covered: 1995–2012.
- Data innovation: uses new value-added trade data (as distinct from gross trade data).
- Method: panel framework controlling for various controls, global common shocks, and country-pair heterogeneity.
- Publication details:
- Authors: Romain A Duval, Kevin C Cheng, Kum Hwa Oh, Richa Saraf.
- Date: April 3, 2014.
- Pages: 46.
- Series: Working Paper No. 2014/052, Issue: 052.
- DOI: https://doi.org/10.5089/9781475522464.001.
- ISBN: 9781475522464.
- ISSN: 1018-5941.
Key findings on trade and business cycle synchronization (BCS)
- Trade intensity measured in value-added terms has a strong positive impact on BCS—conditional on controls, global common shocks, and country-pair heterogeneity.
- That positive impact is absent when gross trade data are used (value-added trade data reveal effects that gross data do not).
- The effect of trade intensity on BCS is larger in crisis times, indicating trade as an important crisis propagation mechanism.
- Bilateral intra-industry trade increases business cycle co-movement.
- Trade specialization correlation between country pairs also increases co-movement, implying that both the intensity and the type of trade matter.
- Dependence on Chinese final demand in value-added terms amplifies international spillovers and the synchronizing impact of growth shocks in China.
Analytical emphasis and implications
- Value-added trade measures uncover links between trade integration and BCS that gross trade measures miss.
- Crisis amplification: stronger synchronizing effects during crises point to trade channels as vectors for international crisis propagation.
- Composition matters: intra-industry trade and specialization correlations are important determinants of co-movement beyond sheer trade volume.
- China channel: countries more dependent on Chinese final demand in value-added terms face larger spillover and synchronization risks from Chinese growth shocks.
Subject classifications and keywords
- Subjects: Business cycles, Economic growth, Economic integration, Exports, Financial integration, Financial markets, International trade, Plurilateral trade, Trade integration.
- Keywords: Asia, Asia and Pacific, Business Cycle Synchronization, Business cycles, correlation index, dependence vis-à-vis, Exports, Financial integration, Global, growth rate, industry trade, North America, Plurilateral trade, Spillovers, Trade, trade data, Trade integration, trade intensity, trade specialization correlation, trade variable, Value Added, vertical integration, WP.
IMF Working Paper: "Trade Integration and Business Cycle Synchronization: A Reappraisal with Focus on Asia" (Working Paper No. 2014/052).