Investigating The Dynamic of Business Cycle Fluctuations in Developed Asian Economies

DOI: 10.5176/2251-1938_ORS35

Authors: Siok Kun Sek, Abdullah Al-Jawarneh and Wai Mun Har

Abstract:

In this study, we conduct empirical analysis to compare the impacts of domestic shocks relative to that of internal shocks on business cycle fluctuation and economics in several developed Asian economies. In order to analyze the dynamic of shocks on business cycle fluctuation, a structural vector auto-regression model (SVAR) is applied. The analysis is ranging from 1970 Q1 to 2010 Q3. The domestic developed Asian countries consist of Hong Kong, Japan, Korea, Singapore and Taiwan; while the foreign economy is represented by the United States. The results indicate that internal factors are the main source of business cycle fluctuation in these economies while external factors contribute to relatively low impacts on business cycle fluctuations. On the other hand, both external and internal factors have relatively large impacts on the demand or price movements in these economies. The impacts of external factors are increasing over time and exceed the impacts of internal factors in some economies.

Keywords: business cycle fluctuation, internal and external shocks, aggregate demand and aggregate supply