Philippine E-Journals

Regime-Switching Business Cycle Synchronization in the ASEAN

Yuthana Sethapramote | Athakrit Thepmongkol

 

Abstract:

Abstract: This paper investigates patterns of business cycle synchronization and analyzes the underlying common factors in six ASEAN countries, that is, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Two important findings result. First, according to resulting regime probabilities calculated from the Markov-switching model, Singapore is not synchronized with other ASEAN members, while Indonesia, Malaysia, and the Philippines are highly correlated. Second, according to the principal component analysis, we find that the world’s import value growth, the output growth of China, and the capital flow of Singapore are most likely to account for 88% of variation in probabilities of the ASEAN being in the contraction regime.