The role of production fragmentation in international business cycle synchronization in East Asia

Fumihide Takeuchi

Journal of Asian Economics, 2011, vol. 22, issue 6, 441-459

Abstract: This paper analyzes factors contributing to the observed increase in international business cycle synchronization between eight East Asian developing countries and the major developed economies of Japan and the United States. To this end, a two-country dynamic general equilibrium (DGE) model is proposed which focuses on the role of production fragmentation among these countries. A key feature of the model is that it includes the trade in differentiated capital goods, which are added to the capital stock for production, and the technology embodied in these capital goods. The parameters of the model are calibrated using actual data of the countries included. Model simulations are conducted for two periods (1993–1997 and 1999–2005), before and after the Asian financial crisis, showing that the increase in business cycle synchronization can be attributed mainly to the growing fragmentation of production activities.

Keywords: International business cycle Synchronization; Fragmentation; Dynamic general equilibrium model (search for similar items in EconPapers)
JEL-codes: E32 F41 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:22:y:2011:i:6:p:441-459

DOI: 10.1016/j.asieco.2011.07.003

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