As Korea increases its trade within Asia, it is becoming more and more integrated with the other economies in the region. Theoretically, increased trade can lead business cycles across trading partners to be patterned in either direction, towards convergence or divergence. By using the data for twelve Asian economies, this paper finds that intra-industry trade is the major channel by which the business cycle of Korea becomes synchronized with that of other Asian economies, although increased trade itself does not necessarily lead to close business cycle coherence.

Executive Summary

I. Introduction

II. Trade Patterns and Business Cycle Co-Movements

III. Data and Statistical Findings

IV. Methodology and Results

V. Policy Coordination and Business Cycle Co-Movements

VI. Conclusion

References