Determinants of international transmission of business cycles to Turkish economy |
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| Institution: | 1. Faculty of Economics, Chulalongkorn University, Phayathai Road, Pathumwan, Bangkok 10330, Thailand;2. Economics, LMBS, London Metropolitan University, 84 Moorgate, London EC2M 6SQ, UK;1. Borsa Istanbul, Research Department, Istanbul 34467, Turkey;2. Middle East Technical University, Department of Business Administration, Ankara 06531, Turkey;3. Central Bank of the Republic of Turkey, Markets Department, Ankara 06100, Turkey;4. Borsa Istanbul, Business & Product Development Department, Istanbul 34467, Turkey;1. School of Management, University of Chinese Academy of Sciences, Beijing 100190, China;2. Wang Yanan Institute for Studies in Economics (WISE), Xiamen University, Xiamen 361005 Fujian, China |
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| Abstract: | This study aims to investigate the channels through which international business cycles are transmitted to Turkish economy. Our analysis follows two steps: i) business cycle transmission is measured using Longest Common Subsequence (LCS) method, a pattern recognition algorithm that accounts for the nonlinear and time-varying nature of business cycles and ii) the potential mechanisms of propagation of international business cycles are examined by specifying a panel regression model in which the LCS measure of synchronization is used as the dependent variable. Applying several panel estimation methods to the bilateral data from 22 countries over the 1998–2009 periods, we find that both trade and financial similarities are significant in the transmission of business cycles to Turkish economy. Especially, the results highlight the role of trade integration indicating that Turkish business cycles are closely linked with the business cycles of the members of European Custom Union. |
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