This paper examines the characteristics of international business cycles among the Asia-Pacific economies in the period of 2000:Q1-2013:Q4. A dynamic factor model is estimated for the output fluctuations and five macroeconomic drivers of business cycles. The estimation extracts the latent common factor shared by fourteen APEC economies and the region-specific factors of North America, Northeast Asia, Southeast Asia, and Oceania. We find that the relative contributions of the common and region-specific factors of business cycles are significant in accounting for national output fluctuations. Evidence for international business cycle comovements is strong between North America and the common business cycle particularly at low frequencies. North America and Northeast Asia also show significant business cycle synchronization. As for the driving forces of business cycles, international trade provides the largest contribution across four regions in the Asia Pacific and the monetary policy and productivity drivers are subsequent to it. The overall finding signifies the greater probability of economic cooperation and regionally coordinated monetary policies among the APEC economies.
Executive Summary I. Introduction
II. Empirical Methodology and Data 1. Dynamic Latent Factor Model 2. Variance Decompositions 3. Dynamic Correlations 4. The Data
III. International Business Cycle Comovements 1. Latent Factors of International Business Cycles 2. International Business Cycle Comovements
IV. Driving Forces of Business Cycles 1. Regional Characteristics 2. National Characteristics