Research On East Asia Regional Economic Integration And Business Cycle Synchronization

In recent years, the trade relation between china and East Asian countries is more and more close. The ASEAN countries has been China's fourth largest trading partner, and is expected to soon overtake Japan to become China's third largest trading partner. Trade is an important channel of transmission of economic cycles, so the East Asian countries'economic fluctuations are affected by china's significantly. On the other hand, East Asian economic fluctuations are also affect China's economy deeply. Especially in recent years, the preading of the global financial crisis had a great impact on china's economy. For the sharp drop in consumer demand in the United states, Japan and Europe,significantly reduced China's exports and affected the Chinese economy steady operation.East Asian countries as China's components suppliers, those economy are also affected by the decline in Chinese exports and fell sharply.It can be seen, with economic globalization and the rapid development of East Asian economic integration, China's economy has become a part of the East Asian economic cycles. The co-movements of economic cycles among east asian countries have been strengthened. At present East Asian countries are facing the most serious financial crisis since the 1930'.The researches of East Asian business cycle patterns, the transmission mechanism of business cycles and the new features of East Asian business cycles are of great important theoretical and practical significance for the grasp of the Chinese economy and East Asia fluctuation rules of the business cycles, enhancing regional economic cooperation and international policy coordination, the implementation of effective macroeconomic regulation and avoiding the East Asian economic fluctuations.The thesis firstly give the summary of the concepts of economic integration as well as the regional economic integration theories.These are the basis of the following research. Then the author give the type of regional economic integration organizations. After that, the author introduce the theories of regional integration from the static analysis to he dynamic analysis and give the existing limitations. Finally, we discuss the current practices on regional economic integration in diffrent regions and the new features.The second chapter constructed a theoretical framework for the thesis.Explain in theoretical how the regional economic integration, trade, investment and policy coordination impact on the business cycles. It is no doubt that the regional economic integration will enhance the trade among countries.But wether this enhancement will increase the business cycle co-movement is not sure. The investment in the region also affect the business cycles.The increase in national investment links will also enhance the business cycles synchronization. In addition a higher level of regional economic integration, the macroeconomic policy coordination among countries will as same strengthen the co-movement of the business cycles.In the third chapter, we analysis the economic base for east asian integration and have an outlook for the future of east asian regional cooporations. Introduce the difficulties faced by regional integration in East Asia. At last the author propose to built the East Asia Free Trade Area.In this thesis empirical analysis includes four parts. The first is to measure the business cycle synchronization in east asia. Though the empirical test we can conclude the east asian countries have a certain degree of business cycle synchronization.After 1993.most east asian countries are experiencing the same two expansion periods (1993-1995, 2004-2007) and two recession periods (1997-1999, 2008). It should be said, since 1993, the east asian counties'business cycle synchronization were increased.The second is to analyze the impact of regional trade on the east asia business cycle synchronization. The empirical results show that the increase in regional trade density does not necessarily bring the synchronization of macroeconomic fluctuations. The possible cause for this result is as Pradumna B. Rana (2007) said trade intensity does not necessarily bring about the synchronization of macroeconomic fuluctuation, especially when the intra-industry trade is more than intre-industry trade the synchronization of production will be reduced.The third is to investigate how FDI affect the business cycle synchronization. From our experience, the promotion of FDI has an important role on the GDP growth.The changes of FDI inEast Asian countries lead to changes in GDP. This shows that FDI play an important role for economic growth in East Asian countries. However, because the amounts of FDI in diffrents east asian countries are vary dramatically the affectness on the business cycle in different countries is different. Therefore, FDI net inflows in East Asia can not make a more synchronized business cycles.Finally, we investigate the relation between macroeconomic policies in East Asia and synchronization of business cycles. From the research results we find the stong co-movements of monetary policies, exchange rate policies and fiscal policies among east asian countries. while testing the affectness of interest rates and government spending on output fluctuations , we found the countries policies coordinations will promote east asian countries's business cylces synchronization.The last part of this thesis we give a conclusion of the empirical analysis.