Do Regional Integration Agreements Increase Business-Cycle Convergence? Evidence From APEC and NAFTA

Viviana Fernandez and Ali Kutan

No wp765, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Using monthly industrial sector data from January 1971 to March 2004, we test for business cycles convergence among the major APEC members: Japan, South Korea, Malaysia, Mexico, USA, and Canada. In addition, we examine the synchronization of business cycles among Australia, Japan, and South Korea, based on the quarterly data for the 1957-2003 period, as well as among the different economic sectors of the NAFTA countries from January 1970 through March 2004. We apply different techniques to identify business cycles. In particular, we propose a new trend-cycle decomposition method based on wavelet analysis. The results show that convergence of business cycles of Asia-Pacific countries is far from complete, but joining the APEC has increased the mean correlation of industrial production cycles of the member economies. On the other hand, although some economic sectors of the NAFTA countries already exhibited some degree of business cycle co-movement even during pre-NAFTA period, the volatility of pair-wise correlation of business cycles declined during NAFTA. In addition, we conclude that, in general, the transmission of business cycles is relatively slow, and, consequently, business cycles appear to be asynchronous.

Keywords: business-cycles convergence; wavelets; APEC; NAFTA (search for similar items in EconPapers)
JEL-codes: B41 E32 (search for similar items in EconPapers)
Pages: pages
Date: 2005-04-01
New Economics Papers: this item is included in nep-int and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Working Paper: Do Regional Integration Agreements Increase Business-Cycle Convergence? Evidence from Apec and Nafta (2005)
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