The myth of decoupling

Wälti, Sébastien (2009): The myth of decoupling.

Abstract

This paper casts light on the ongoing debate about whether emerging markets have decoupled from advanced economies. The proponents of the decoupling hypothesis argue that emerging markets have made significant progress in reducing external vulnerabilities, strengthening domestic policy frameworks, and achieving stronger domestic demand growth, thereby leading to lower business cycle comovements with advanced economies. This view runs against extensive empirical evidence showing that globalization, namely rising trade and financial integration, raises business cycle synchronisation. We find that decoupling is a myth: business cycle synchronicity between emerging markets and advanced economies has generally not declined in recent years.

• 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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