Asia’s decoupling: fact, forecast or fiction?

Lillie Lam and James Yetman

No 438, BIS Working Papers from Bank for International Settlements

Abstract: Standard measures of real economic co-movement between Asia-Pacific economies and those elsewhere had been observed to follow a downward trend, leading some commentators to suggest that the region was decoupling. However, this process reversed in response to the International Financial Crisis, and co-movement increased to historically high levels for some economies. We examine co-movement patterns and show that these are very sensitive to changes in macroeconomic volatility over time. Controlling for this, however, co-movement is closely linked to underlying trade and financial integration. If international links continue to strengthen in future, co-movement will strengthen in tandem. Decoupling is more a fiction than a fact or a forecast.

Keywords: business cycle co-movement; decoupling (search for similar items in EconPapers)
Pages: 30 pages
Date: 2013-12
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:438

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