Dynamics of Business Cycles in Vietnam: A comparison with Indonesia and Philippines

Le, Ha (2014): Dynamics of Business Cycles in Vietnam: A comparison with Indonesia and Philippines.

Abstract

Abstract: The objective of this paper is to analyze the dynamics of business cycle features and investigate the main source of macroeconomic fluctuations in Vietnam, and then make comparison to Indonesia and the Philippines. In the first task, the business cycle features are evaluated by properties of data, including volatility, persistence and co-movement after taking Hodrick-Prescott (HP) filter in 2 periods: before and after the global financial crisis in 2008. Results indicate that these properties mostly concentrate on second period (2008-2013) in Vietnam, whereas the Asian Financial Crisis leads to a high volatility and persistence in Philippines and Indonesia. In order to identify the sources of macroeconomic fluctuations, the study adopts the Structural Vector Autoregression (SVAR) with data covered from 1996 to 2013. The evidence for countries suggests that (i) the main source of output variance is domestic supply shocks but there is a significant decrease in long-run; (ii) The fluctuations of trade balance are mostly due to external shocks, especially term of trade shocks in Vietnam, as opposed to Philippines and Indonesia where IS shocks play an important role; (iii) The fluctuations of real exchange rate are mainly driven by the domestic shocks but internal causes of each country are different; (iv) the most two important sources of price’s movements are domestic shocks, especially IS and nominal shocks in Vietnam.

• Item Type: MPRA Paper
• Commentary on: Eprints 0 not found.
• Language: English
• Keywords: Structure Shocks, Business Cycles, SVAR
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E61 - Policy Objectives ; Policy Designs and Consistency ; Policy Coordination

References

Agenor, P. R., McDermott, C. J., & Prasad, E. (2000). Macroeconomic fluctuations in developing countries: Some stylized facts. The World Bank Economic Review, 14(2), 251-85.

Ahmed, S. & Murthy, R. (1994). Money, output, and real business cycles in a small open economy. The Canadian Journal of Economics, 27(4), 982-993.

Alcorta, L. & Nixson, F. (2010). The global financial crisis and the developing world: Impact on and implications for the manufacturing sector. Development Policy and Strategic Research Branch Working Paper.

Al-Jawarneh, A., & Sek, S. K. (2012). The impact of external shocks on business cycle fluctuation in several developed Asian countries. Applied Mathematical Siences, 6(65), 3209-3223.

Artis, M. J. & Zhang, W. (1995). International business cycles and the ERM: Is there a European business cycle? Finance Economics, 2(1), 1-16.

Backus, D. K., & Kehoe, P. J. (1992). International evidence on the historical properties of business cycle. American Economic Review, 82(4), 864-888.

Baxter, M., & King, R. G. (1999). Measuring business cycles approximating band-pass filter for economic time series. Review Economics and Statistics, 81(4), 575-593.

Blanchard, O. J., & Quah, D. (1989). The dynamic effects of aggregate demand and supply disturbances. The American Economic Review. 79(4), 665-673.

Cicco, J. G., Pancrazi, R., & Uribe, M. (2010). Real business cycles in emerging countries? The American Economic Review, 100(5). 2510-2531.

Cover, J. P., Enders, W., & Hueng, C. J. (2006). Using the aggregate demand-aggregate supply model to identify structural demand side and supply-side shocks: Results using a bivariate VAR. Journal of Money, Credit and Banking, 38(3), 777-790.

Gali, J. (1992). How well does the IS-LM model fit postwar U.S data?. The Quarterly Journal of Economics, 107(2), 709-738.

Hirata, H., Kim, H. S., & Kose, M. A. (2007). Sources of fluctuations: the case of MENA. Emerging Markets and Trade. 43(1). 5-34.

Hoffmaister, A. W., & Roldos, J. E. (1996, October). Are business cycles different in Asia and Latin America (IMF Working Paper No. WP/97/9). Mexico City, Mexico. Retrieved January, 1997, from http://www.imf.org/external/pubs/ft/wp/wp9709.pdf Hoffmasiter, A. W. & Roldos, J. E. (2001). The sources of macroeconomic fluctuations in developing countries: Brazil and Korea. Journal of Macroeconomics, 23(1), 11-30.

Long, J., & Plosser, C. (1983). Real business cycle. Journal of Political Economy. 91(1), 39-69.

Mendoza, E. G. (1991). Real business cycles in a small open economy. The American Economic Review. 81(4), 797-818.

Kim, S. H., Kose, M. A., & Plummer, M. G. (2003). Dynamics of business cycles in Asia: Differences and similarities. Review of Development Economics, 7(3), 462-477.

King, R. F., & Plosser, C. I. (1984). Money, credit and prices in real business cycle. American Economic Review. 74(1). 363-380.

Lucas, R. E. (1977). Understanding of business cycles. Journal of Monetary Economics, 5(1). 7-29.

Siregar, H., & Ward, B. D. (2001). Sources of fluctuations in the Indonesia macroeconomy: an application of simple structural VAR model. Singapore Economic Review, 45(1), 73-98.

Shapiro, M., & Watson, M. (1988). Sources of business cycle fluctuations. NBER Macroeconomics Annual, 3(1), 111-156.

Smets, F. & Wouters, R. (2007). Shocks and frictions in US business cycles: a Bayesian DSGE approach. The American Economic Review, 97(3), 586-606.

Stock, J. H., & Watson, M. W. (2002). Has the business cycle changed and why?. National Bureau Of Economic Research, 9127(3), 1-80.

Thanh, T. T. (2007). Determinants of business cycle synchronization in ASEAN-5. SERC conference publication Singapore Economic Review.