Synchronized Business Cycles in East AsiaSince the early 1980s, East Asian countries outside Japan chose a development strategy based on international trade and sound macroeconomic policies. Their subsequent rapid export-led economic growth with fiscal balance and relative price-level stability led to what the World Bank (1993) called the “The East Asian Miracle”.
Less well known is that these high-growth economies have experienced a synchronized business cycle. Figure 1 suggests—as it will be shown later on by econometric estimations—that, since 1980, the real GDPs of the smaller East Asian economies have fluctuated in parallel. In particular, growth rates of Hong Kong, Indonesia, Korea, Malaysia, Taiwan, and Thailand have been highly correlated. These countries are the core of the East Asian business cycle, to which the Philippines and Singapore are more loosely attached.
While there is no doubt that the intensification of intra-Asian trade and the synchronization of the business cycles are closely intertwined, the causality is unclear. Do closer trade linkages contribute to a common business cycle or are there common external shocks, or both?
Although international trade has been—and will be—a critical factor in their economic success, it also increases their collective vulnerability to foreign “shocks”. And fluctuations in the yen/dollar exchange rate have been the most important of these shocks. By keeping their exchange rates stable against the dollar, the smaller East Asian economies must cope with extraneous fluctuations of the dollar against the yen....,
our estimates show that neither the US, nor Japan, nor the East Asian countries collectively significantly influence output fluctuations in China—whose business cycle seems to be relatively uncorrelated with those in other Asian countries. Why should China be comparatively immune from exogenous shocks originating abroad?Source:
Stanford University
ZenTrader's Note: I think economically the business cycle of Malaysia is already peaked and to be followed by a contractional period. The transition from Peak to Trough could be in orderly manner or in panic mode. The real answer is I don't know. So the best strategy is to safe saving as much cash money as possible, reduce your credit card balance, and propose to government to give you cash coupon (not the one to be exchanged for your next new car as buying a new car will increase your debt level and reduce your positive cashflow. Also read this very funy news:
Entice people to turn in old cars with cash vouchers) for you to trade in your 30 year-old TV, 20 year-old underwear, 5 year-old computer, 30 year-old non-digital camera, wooo my trade in list to be proposed to the government for cash coupon is damn long ... Happy trading. :)
There are currently :
visitors online. Powered by