Business cycles synchronization in East Asian economy: Evidences from time-varying coherence study

This paper analyzes the feasibility of a monetary union in East Asia focusing on business cycles synchronization. Considering the critical role of trade integration in the East Asian integration process, we study whether East Asian countries are characterized by business cycle synchronization. The related empirical literature dedicated to business cycles synchronization in East Asia does not lead to firm conclusion. In this paper, we suggest a different empirical approach allowing, contrary to the previous studies, to detect endogenously structural changes in the comovement process between outputs. We apply a new measure based on the time-varying coherence function. Such a measure not only detects comovement dynamics but it distinguishes also this dynamics between short- and long-term. We compute also cohesion statistics to test if countries tend to be more synchronized or not. The main finding of this paper is that the increase in bilateral trade inside the East Asian region significantly improves long-run business cycle synchronization. The short-run influence of bilateral trade shows mixed results. Indeed, short-run cycles remain significantly influenced both by shocks hitting each country and by economic policy responses. As a consequence, more bilateral trade and convergence in economic policy constitute two complementary processes to promote business cycle synchronization.     

The feasibility of currency union in Gulf Cooperation Council countries: A business cycle synchronisation view

This paper study the feasibility of a monetary union among Gulf Cooperation Council (GCC) countries, by measuring the evolution of economic integration among them. Considering the critical role of crisis and shocks in the integration process within the region, we determine whether GCC countries are characterised by a common business cycle. We suggest a different empirical approach that, unlike previous studies, allows one to endogenously detect structural changes in the comovement process between outputs. We apply a new measure for this region that is based on the time‐varying coherence function. Such a measure not only detects comovement dynamics but also distinguishes these dynamics in terms of short‐ and long‐term cycles. Additionally, we can test whether certain countries tend to be more synchronised. The main finding of this study is that not all GCC countries share a common short‐term business cycle. However, in the long term, all country‐pairs indicate a medium‐level synchronisation in the most recent subperiods. The new role of the United Arab Emirates’ regional trade platform allows it to strengthen long‐term business cycle comovement, thus differentiating it from other GCC country‐pairs that have shown a decline in the last two subperiods.