How Synchronized Is China with the Other Asia-Pacific Countries?

Abstract

We investigate the synchronization of growth cycles between China and 11 Asia-Pacific countries using quarterly data for the period 1993:2-2012:4. We employ a wavelet-based measure of comovement to examine the degree of business cycle synchronization in the time-frequency framework. While we find that the growth cycles of China is synchronized with the other Asia-Pacific economies, the strength of business cycle synchronization fluctuates significantly across time and frequencies. Our results also illustrate that the degree of comovement between the growth cycles varies across different country pairs in our time-frequency analysis. Overall, we find that the strength of business cycle synchronization between China and other Asia-Pacific countries has increased at long-run fluctuations, especially during and following the recent global financial crisis. We also observe a relatively low degree of comovement between the growth cycles of China and most Asia-Pacific economies almost at all frequencies during the Asian financial crisis. We thus emphasize the importance of examining the strength of business cycle synchronization in the time-frequency domain.