Business Cycle Synchronisation In East Asia

Against the background of the rapid inter- and intraregional integration of East Asia, the authors examine the extent and nature of synchronisation of business cycles in the region. They estimate various specifications of a dynamic common factor model for output growth of ten East Asian countries. A significant common factor is shared by all Asian countries considered, except China and Japan. The degree of synchronisation has fluctuated over time, with an upward trend particularly evident for the newly industrialised countries. Synchronisation appears to mainly reflect strong export synchronisation, rather than common consumption or investment dynamics. Cross-country spill-over effects explain only a small part of the co-movement in the region.