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Contents Introduction

The objective of this paper is to document the key features of business cycles in the Asian economies. We determine the extent of the similarities and differences across the business cycle characteristics of these countries and compare the cyclical regularities in this region with those of the G7 countries. We find that while the patterns of business cycle fluctuations in the main macroeconomic aggregates display important similarities, the behavior of fiscal and monetary policy variables exhibits significant differences across the Asian countries. These economies are generally more volatile than the G7 countries, but the amplitude of economic fluctuations in the Asian countries tends to decrease over time. Comovement and persistence properties of business cycles in the Asian countries are very similar to those of the G7 economies. The cross-country correlations of the cyclical fluctuations in aggregate output and its components in the Asian countries are in most cases positive and seem to be increasing over time. To examine the extent of comovement in the region, we also study different measures of region specific business cycles. We find that there is a high degree of comovement between the business cycles of the individual countries and our measures of Asian business cycles. These results provide important insight into the short-run macroeconomic dynamics, as well as to the region's long-run economic policy objectives. First, the contagious nature of economic fluctuations can be explained at least in part by simple transmission mechanisms of business cycles. Second, the process of long-term economic integration should not be viewed as a major problem as far as the features of macroeconomic fluctuations are concerned, since the types of shocks and their propagation dynamics across these countries are quite similar.