The Influence Of Intra-industry Trade On Business Cycle Synchronization

Since late1990s, the process of regional economic integration in East Asia has begun to accelerate, the economic ties between China and East Asia becoming increasingly closer, the economic fluctuations in different countries or regions affect each other and strongly present the tendency of synchronization. It is generally believed that the international trade is one of important channels for the cross-border transmission of business cycle, domestic and foreign scholars have carried out extensive research on the relationship between the strength of trade and international business cycle synchronization. However, with the evolution of international division system, the form of intra-industry division in East Asia is increasingly prosperous, making the intra-industry influence mechanism becomes an important research direction in the field of business cycle synchronization between China and East Asia. This paper chooses China and East Asia as the research object, combines the theoretical and empirical analysis together to study the influence of intra-industry on business cycle synchronization.On the basis of previous studies, this paper firstly analyzes the general influence mechanism of trade on the business cycle synchronization, and starts from the classical theoretical model to analyze the internal influence mechanism of intra-industry on business cycle synchronization, then tries to take differentiated products intra-industry trade and intermediated products intra-industry trade as the breakthrough point, which make it possible to find out the specific influence route of intra-industry on business cycle synchronization. Then this paper uses related data from1992to2010to measure and analyze the intra-industry trade index and its dynamic development trend of China and major economies in East Asia. At the same time, this paper also takes advantage of Pearson correlation coefficient and business cycle synchronization index to confirm that there is a strong business cycle synchronization trend between China and East Asia, which lays a foundation for the subsequent empirical research. Further, this paper uses the country panel data model, empirically studies the influence of intra-industry trade on business cycle synchronization. The empirical results show that intra-industry trade is positively correlated with the business cycle synchronization. That is to say, as intra-industry develops, the business cycle synchronization between China and East Asia will also be stronger. What’s more, compared with bilateral trade intensity, intra-industry trade has a more significant and direct influence on business cycle synchronization. Therefore, intra-industry trade plays a more critical role in trade channel of business cycle’s transnational transmission. In addition, compared with labor-intensive products intra-industry trade, the capital-intensive products intra-industry trade has a greater promoting effect on business cycle synchronization. Finally, based on the results of theoretical analysis and empirical research, this paper makes recommendations on how to keep China’s economy running smoothly, promote China to play a more active role in East Asia and reasonably adjust China’s foreign trade structure.