Description
The global financial system is the worldwide framework of legal agreements, institutions, and both formal and informal economic actors that together facilitate international flows of financial capital for purposes of investment and trade financing.
” The impact of global ?nancial crisis on business cycles in Asian emerging economies” by Jarko Fidrmuc and Iikka Korhonen
Discussion by Radhika Pandey National Institute of Public Finance and Policy, New Delhi
September 14, 2009
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 1 / by 18 Ja
Motivation
To examine the degree of business cycle synchronization of developed countries with those in emerging economies of China and India. To analyse the role of trade intensity as a determinant of business cycle synchronization of emerging Asian economies with the industrial countries. Whether the current global ?nancial crisis has led to the coupling of business cycles in industrial and emerging economies.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 2 / by 18 Ja
Techniques for describing business cycle correlation
Moving correlation of quarter on quarter GDP growth rates for a four-year moving window. Dynamic correlation: to study co movements at business cycle frequencies.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 3 / by 18 Ja
Key ?ndings
Business cycles in China and India have been very di?erent from those of OECD countries. Trade is an important determinant of business cycle correlation between industrial economies and emerging Asian economies. Current global ?nancial crisis has had similar e?ects on industrial economies and on emerging Asian economies.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 4 / by 18 Ja
Key ?ndings
Non-Eurpoean OECD countries (USA, Korea, Israel and Japan) trading more intensively with China show higher short run correlations. Finland, Norway and Switzerland show higher short run correlation with Indian business cycle, even though their trade with India is quite modest.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 5 / by 18 Ja
Data availability
For all countries except India: 1992-2008. For India: 1993-2008 For India, the quarterly GDP is available from 1996 Q2 onwards.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 6 / by 18 Ja
Moving correlations of selected countries with India
?0.2 0.0
0.2
0.4
USA Germany Japan
0.6 2000
2002
2004
2006
2008
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 7 / by 18 Ja
Cross correlation with industrial countries GDP: Period I (1996-2003)
1 2 3 4 5 6 7 8 9 10 11
Variables Austria Belgium Denmark Germany Finland France UK Italy Netherland Portugal Sweden
t-4 0.13 0.12 0.11 0.14 0.12 0.13 -0.19 0.12 0.11 0.08 0.21
t-3 0.29 0.29 0.26 0.25 0.28 0.28 0.28 0.28 0.27 0.27 0.32
t-2 0.23 0.25 0.26 0.22 0.21 0.25 0.03 0.25 0.23 0.23 0.19
t-1 0.42 0.43 0.45 0.44 0.42 0.43 0.29 0.42 0.43 0.40 0.25
t 0.16 0.18 0.11 0.16 0.16 0.17 0.05 0.17 0.16 0.13 0.36
t+1 -0.17 -0.17 -0.10 -0.15 -0.20 -0.18 -0.12 -0.17 -0.19 -0.20 0.01
t+2 0.14 0.13 0.11 0.12 0.13 0.14 0.18 0.14 0.11 0.11 0.30
t+3 -0.02 0.01 -0.01 -0.00 0.00 -0.01 0.03 0.01 -0.02 -0.02 0.06
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 8 / by 18 Ja
Cross correlation with industrial countries GDP: Period I (1996-2003)
12 13 14 15 16 17 18 19 21 22
Variables Switzerland Norway USA Canada Australia New.Zealand Israel Japan China Spain
t-4 0.20 0.20 -0.20 -0.03 0.14 0.18 0.01 -0.03 0.14 0.13
t-3 0.20 0.23 -0.33 -0.04 0.12 0.23 -0.03 0.08 -0.17 0.31
t-2 0.14 0.45 -0.17 0.07 0.33 0.33 0.06 -0.03 0.25 0.32
t-1 0.35 0.09 0.11 0.25 0.27 0.51 -0.11 0.37 -0.21 0.38
t 0.10 0.21 0.01 0.49 0.51 0.51 0.20 0.33 0.15 0.21
t+1 -0.20 -0.12 0.04 0.36 0.24 0.18 0.36 0.07 -0.11 -0.23
t+2 0.20 0.19 0.09 0.23 0.23 0.03 0.25 0.06 0.36 0.16
t+ -0.0 -0.0 -0.0 0.0 0.0 -0.0 0.0 0.1 -0.1 -0.0
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 9 / by 18 Ja
Cross correlation with industrial countries GDP: Period II (2003-2009 Q1)
Variables Austria Belgium Denmark Germany Finland France UK Italy Netherland Portugal Sweden t-4 0.01 0.01 -0.00 -0.00 0.01 -0.01 0.05 0.02 -0.02 0.02 0.02 t-3 -0.10 -0.09 -0.09 -0.10 -0.08 -0.08 0.15 -0.07 -0.11 -0.09 -0.07 t-2 -0.08 -0.09 -0.03 -0.10 -0.07 -0.07 0.08 -0.07 -0.09 -0.09 0.04 t-1 0.27 0.28 0.28 0.28 0.34 0.29 0.25 0.29 0.29 0.28 0.25 t 0.49* 0.48* 0.51* 0.52* 0.53* 0.50* 0.58* 0.50* 0.51* 0.48* 0.53* t+1 0.41 0.40 0.39 0.43 0.42 0.37 0.58 0.41 0.43 0.39 0.49 t+2 0.08 0.07 0.04 0.11 0.11 0.06 0.30 0.08 0.09 0.04 0.17 t+3 0.22 0.20 0.14 0.19 0.19 0.19 0.16 0.19 0.20 0.19 0.25
1 2 3 4 5 6 7 8 9 10 11
* indicates signi?cant correlation
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 10 / by 18 Ja
Cross correlation with industrial countries GDP: Period II (2003-2009 Q1)
12 13 14 15 16 17 18 19 21 22
Variables Switzerland Norway USA Canada Australia New.Zealand Israel Japan China Spain
t-4 0.06 -0.16 -0.08 -0.17 -0.07 -0.00 -0.12 -0.03 -0.16 0.03
t-3 -0.25 -0.16 0.14 -0.08 0.02 0.12 -0.11 -0.33 -0.03 -0.07
t-2 -0.15 -0.04 0.15 0.06 -0.05 0.10 -0.27 -0.15 0.09 -0.03
t-1 0.11 0.21 0.47 0.37 0.32 0.50 -0.02 -0.05 -0.09 0.32
t 0.28 0.56* 0.67* 0.50* 0.64* 0.64* 0.17 0.17 -0.05 0.51*
t+1 0.27 0.55 0.57 0.47 0.49 0.39 0.50 0.02 0.12 0.42
t+2 -0.09 0.29 0.33 0.37 0.30 0.34 0.24 -0.23 0.24 0.06
t+ 0.2 0.2 0.0 0.1 0.1 0.0 0.2 0.1 0.0 0.1
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 11 / by 18 Ja
Spectral coherence of India with USA
Squared coherency
0.0 0? 16
0.3
0.6
0.9
? 3
? 2 5? 8 3? 4 7? 8 Frequency
?
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 12 / by 18 Ja
Spectral coherence of India with Germany
Squared coherency
0.0 0? 16
0.3
0.6
0.9
? 3
? 2 5? 8 3? 4 7? 8 Frequency
?
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 13 / by 18 Ja
Spectral coherence of India with Norway
Squared coherency
0.0 0? 16
0.3
0.6
0.9
? 3
? 2 5? 8 3? 4 7? 8 Frequency
?
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 14 / by 18 Ja
Low coherence with Japan
Squared coherency
0.0 0? 16
0.3
0.6
0.9
? 3
? 2 5? 8 3? 4 7? 8 Frequency
?
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 15 / by 18 Ja
Detrending debate
Di?erent detrending methods extract di?erent types of business cycle information from the original series (Canova 1998). Uncritical use of mechanical detrending can induce spurious cycles (Harvey and Jaeger, 1993), (Harding and Pagan, 1999). For emerging market economies shocks to both trend and cycle are relevant for business cycle analysis. In emerging economies trend is the cycle (Aguiar and Gopinath 2004).
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 16 / by 18 Ja
Detrending debate
Di?erent detrending methods extract di?erent types of business cycle information from the original series (Canova 1998). Uncritical use of mechanical detrending can induce spurious cycles (Harvey and Jaeger, 1993), (Harding and Pagan, 1999). For emerging market economies shocks to both trend and cycle are relevant for business cycle analysis. In emerging economies trend is the cycle (Aguiar and Gopinath 2004).
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 16 / by 18 Ja
Summary conclusions
Indian GDP data is available from 1996. Signi?cant synchronization of Indian business cycle with those of industrial economies irrespective of trade ties. Detrending of output may not be desirable for emerging economy like India.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 17 / by 18 Ja
Thank you
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 18 / by 18 Ja
doc_653792362.pdf
The global financial system is the worldwide framework of legal agreements, institutions, and both formal and informal economic actors that together facilitate international flows of financial capital for purposes of investment and trade financing.
” The impact of global ?nancial crisis on business cycles in Asian emerging economies” by Jarko Fidrmuc and Iikka Korhonen
Discussion by Radhika Pandey National Institute of Public Finance and Policy, New Delhi
September 14, 2009
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 1 / by 18 Ja
Motivation
To examine the degree of business cycle synchronization of developed countries with those in emerging economies of China and India. To analyse the role of trade intensity as a determinant of business cycle synchronization of emerging Asian economies with the industrial countries. Whether the current global ?nancial crisis has led to the coupling of business cycles in industrial and emerging economies.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 2 / by 18 Ja
Techniques for describing business cycle correlation
Moving correlation of quarter on quarter GDP growth rates for a four-year moving window. Dynamic correlation: to study co movements at business cycle frequencies.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 3 / by 18 Ja
Key ?ndings
Business cycles in China and India have been very di?erent from those of OECD countries. Trade is an important determinant of business cycle correlation between industrial economies and emerging Asian economies. Current global ?nancial crisis has had similar e?ects on industrial economies and on emerging Asian economies.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 4 / by 18 Ja
Key ?ndings
Non-Eurpoean OECD countries (USA, Korea, Israel and Japan) trading more intensively with China show higher short run correlations. Finland, Norway and Switzerland show higher short run correlation with Indian business cycle, even though their trade with India is quite modest.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 5 / by 18 Ja
Data availability
For all countries except India: 1992-2008. For India: 1993-2008 For India, the quarterly GDP is available from 1996 Q2 onwards.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 6 / by 18 Ja
Moving correlations of selected countries with India
?0.2 0.0
0.2
0.4
USA Germany Japan
0.6 2000
2002
2004
2006
2008
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 7 / by 18 Ja
Cross correlation with industrial countries GDP: Period I (1996-2003)
1 2 3 4 5 6 7 8 9 10 11
Variables Austria Belgium Denmark Germany Finland France UK Italy Netherland Portugal Sweden
t-4 0.13 0.12 0.11 0.14 0.12 0.13 -0.19 0.12 0.11 0.08 0.21
t-3 0.29 0.29 0.26 0.25 0.28 0.28 0.28 0.28 0.27 0.27 0.32
t-2 0.23 0.25 0.26 0.22 0.21 0.25 0.03 0.25 0.23 0.23 0.19
t-1 0.42 0.43 0.45 0.44 0.42 0.43 0.29 0.42 0.43 0.40 0.25
t 0.16 0.18 0.11 0.16 0.16 0.17 0.05 0.17 0.16 0.13 0.36
t+1 -0.17 -0.17 -0.10 -0.15 -0.20 -0.18 -0.12 -0.17 -0.19 -0.20 0.01
t+2 0.14 0.13 0.11 0.12 0.13 0.14 0.18 0.14 0.11 0.11 0.30
t+3 -0.02 0.01 -0.01 -0.00 0.00 -0.01 0.03 0.01 -0.02 -0.02 0.06
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 8 / by 18 Ja
Cross correlation with industrial countries GDP: Period I (1996-2003)
12 13 14 15 16 17 18 19 21 22
Variables Switzerland Norway USA Canada Australia New.Zealand Israel Japan China Spain
t-4 0.20 0.20 -0.20 -0.03 0.14 0.18 0.01 -0.03 0.14 0.13
t-3 0.20 0.23 -0.33 -0.04 0.12 0.23 -0.03 0.08 -0.17 0.31
t-2 0.14 0.45 -0.17 0.07 0.33 0.33 0.06 -0.03 0.25 0.32
t-1 0.35 0.09 0.11 0.25 0.27 0.51 -0.11 0.37 -0.21 0.38
t 0.10 0.21 0.01 0.49 0.51 0.51 0.20 0.33 0.15 0.21
t+1 -0.20 -0.12 0.04 0.36 0.24 0.18 0.36 0.07 -0.11 -0.23
t+2 0.20 0.19 0.09 0.23 0.23 0.03 0.25 0.06 0.36 0.16
t+ -0.0 -0.0 -0.0 0.0 0.0 -0.0 0.0 0.1 -0.1 -0.0
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 9 / by 18 Ja
Cross correlation with industrial countries GDP: Period II (2003-2009 Q1)
Variables Austria Belgium Denmark Germany Finland France UK Italy Netherland Portugal Sweden t-4 0.01 0.01 -0.00 -0.00 0.01 -0.01 0.05 0.02 -0.02 0.02 0.02 t-3 -0.10 -0.09 -0.09 -0.10 -0.08 -0.08 0.15 -0.07 -0.11 -0.09 -0.07 t-2 -0.08 -0.09 -0.03 -0.10 -0.07 -0.07 0.08 -0.07 -0.09 -0.09 0.04 t-1 0.27 0.28 0.28 0.28 0.34 0.29 0.25 0.29 0.29 0.28 0.25 t 0.49* 0.48* 0.51* 0.52* 0.53* 0.50* 0.58* 0.50* 0.51* 0.48* 0.53* t+1 0.41 0.40 0.39 0.43 0.42 0.37 0.58 0.41 0.43 0.39 0.49 t+2 0.08 0.07 0.04 0.11 0.11 0.06 0.30 0.08 0.09 0.04 0.17 t+3 0.22 0.20 0.14 0.19 0.19 0.19 0.16 0.19 0.20 0.19 0.25
1 2 3 4 5 6 7 8 9 10 11
* indicates signi?cant correlation
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 10 / by 18 Ja
Cross correlation with industrial countries GDP: Period II (2003-2009 Q1)
12 13 14 15 16 17 18 19 21 22
Variables Switzerland Norway USA Canada Australia New.Zealand Israel Japan China Spain
t-4 0.06 -0.16 -0.08 -0.17 -0.07 -0.00 -0.12 -0.03 -0.16 0.03
t-3 -0.25 -0.16 0.14 -0.08 0.02 0.12 -0.11 -0.33 -0.03 -0.07
t-2 -0.15 -0.04 0.15 0.06 -0.05 0.10 -0.27 -0.15 0.09 -0.03
t-1 0.11 0.21 0.47 0.37 0.32 0.50 -0.02 -0.05 -0.09 0.32
t 0.28 0.56* 0.67* 0.50* 0.64* 0.64* 0.17 0.17 -0.05 0.51*
t+1 0.27 0.55 0.57 0.47 0.49 0.39 0.50 0.02 0.12 0.42
t+2 -0.09 0.29 0.33 0.37 0.30 0.34 0.24 -0.23 0.24 0.06
t+ 0.2 0.2 0.0 0.1 0.1 0.0 0.2 0.1 0.0 0.1
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 11 / by 18 Ja
Spectral coherence of India with USA
Squared coherency
0.0 0? 16
0.3
0.6
0.9
? 3
? 2 5? 8 3? 4 7? 8 Frequency
?
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 12 / by 18 Ja
Spectral coherence of India with Germany
Squared coherency
0.0 0? 16
0.3
0.6
0.9
? 3
? 2 5? 8 3? 4 7? 8 Frequency
?
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 13 / by 18 Ja
Spectral coherence of India with Norway
Squared coherency
0.0 0? 16
0.3
0.6
0.9
? 3
? 2 5? 8 3? 4 7? 8 Frequency
?
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 14 / by 18 Ja
Low coherence with Japan
Squared coherency
0.0 0? 16
0.3
0.6
0.9
? 3
? 2 5? 8 3? 4 7? 8 Frequency
?
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 15 / by 18 Ja
Detrending debate
Di?erent detrending methods extract di?erent types of business cycle information from the original series (Canova 1998). Uncritical use of mechanical detrending can induce spurious cycles (Harvey and Jaeger, 1993), (Harding and Pagan, 1999). For emerging market economies shocks to both trend and cycle are relevant for business cycle analysis. In emerging economies trend is the cycle (Aguiar and Gopinath 2004).
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 16 / by 18 Ja
Detrending debate
Di?erent detrending methods extract di?erent types of business cycle information from the original series (Canova 1998). Uncritical use of mechanical detrending can induce spurious cycles (Harvey and Jaeger, 1993), (Harding and Pagan, 1999). For emerging market economies shocks to both trend and cycle are relevant for business cycle analysis. In emerging economies trend is the cycle (Aguiar and Gopinath 2004).
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 16 / by 18 Ja
Summary conclusions
Indian GDP data is available from 1996. Signi?cant synchronization of Indian business cycle with those of industrial economies irrespective of trade ties. Detrending of output may not be desirable for emerging economy like India.
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 17 / by 18 Ja
Thank you
Discussion by Radhika Pandey National Institute ” The ofimpact Public of Finance global and ?nancial Policy, crisis New on Delhi business () cycles in September Asian emerging 14, 2009 economies” 18 / by 18 Ja
doc_653792362.pdf