No decoupling, more interdependence: business cycle comovements between advanced and emerging economies

Wälti, Sébastien (2010): No decoupling, more interdependence: business cycle comovements between advanced and emerging economies.

Abstract

The decoupling hypothesis is the idea that business cycles in emerging market economies have become more independent from business cycles in advanced economies in recent years. Decoupling essentially amounts to a structural break in the degree of business cycle interdependence between the two groups of economies, and it can be tested as such. We develop an innovative measure of business cycle interdependence based on the Euclidean distance, available at the annual frequency, which allows for a proper test for a structural break in a graphical setup. We also make use of a standard econometric test. Both approaches point to the same conclusion: there has been no decoupling in recent years. In fact, the degree of business cycle interdependence has become stronger.

• Item Type: MPRA Paper
• Language: English
• Keywords: business cycle; synchronisation; globalisation; decoupling; emerging markets
• Subjects: F - International Economics > F1 - Trade > F15 - Economic Integration; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration

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