International interdependence and business cycle transmission in ASEAN

This study investigates the international transmission of business cycles a mong the ASEAN countries of Indonesia, Malaysia, Philippines, Singapore and Thailand, and between the ASEAN nations and their major trading partners, the United States, Australia, Japan, and the European Union. The research u ses trade flows to show the pattern of economic interdependence, and princi pal components analysis, vector autoregressions, and spectral analysis to e xplore the possibility of a unique ASEAN business cycle. Binational VARs ar e used to examine the relative impacts of each country upon the others. Spe ctral analysis is used to check for the possibility of "mode-locking" betwe en the countries that may serve to bring about some synchronization. Intere stingly, there is evidence of the existence of a specific ASEAN regional bu siness cycle. However, the VARs give only weak evidence of transmission of business cycles among the ASEAN economies and between the ASEAN economies a nd their major trading partners. The apparent weakness of the transmission is explained by the fact that commodity price fluctuations, wars, and major political disturbances, due to the process of nation-building, have interr upted the natural generation of business cycles, dominated the interdepende nce effects between nations, and hindered the measurement of international business cycle transmission. (C) 1999 Academic Press. Journal of Economic L iterature Classification Numbers: F41, F47, E32.