East Asia Economic Cycle Entrainment And Transmission Mechanism Research

With the upgrading importance of East Aisa in the world economy, and the deepening cooperation among East Asia economies, the business cycle co-movement of the East Aisan economies has become a topic that calls more people’s concern. According to the research in this paper, there are business cycle co-movments among East Asian economies, and the co-movements have become more obvious in recent years. This paper analyses the transmission mechanisim of the East Asia economies’ business cycles mainly from the aspect of trade and specialization, and finds that these two channels can explain the reason of the co-movements of the East Asian economies’business cycle. The paper also discusses other channels, such as FDI and policy coordination, that affect the business cycle co-movement. At finally, the paper uses impulse respons function and the variance decomposition of the VAR models to explore the interaction between one East Asian economy and the rest of the East Aisa. And the paper reveals the reason why the business cycles perfrom more synchrionize during a recession.