International Transmission Of Economic Cycles And Policy Coordination

This paper conducted a wide set of macroeconomics data to examine the international business cycle linkages among the major advanced economies-hereafter called the Group of seven countries-and between the advanced and developing economies and also among the Asian economies. In examining the internationalbusiness cycles linkages among these economies, I found the importance of these linkages while economic and financial interdependence has increased with rapid globalization in recent years. Although there has been skepticism as to the comovement among the advanced economies from the experience of the early 1990s, in contrast with the 1970s and 1980s, there is a clear correlation between advanced and developing economies and among Asian economies.The paper also examined the main international transmission channels of shocks-trade and financial markets-try to conclude the transmission channels and transmission mechanism. Transmission through financial market seems complex. There are four channels though international financial market: the interest rate, the price of nonmonetary assets, the exchange rate, and the credit-rationing. The increased economic interdependence makes international business cycle linkages stronger among advanced economies, between advanced and developing economies, among Asian economies. The speed and deepness with which disturbances are transmitted abroad are likely to increase somewhat, as financial market interdependence increased. The paper finally notes that the cooperation should be dealt internationally to minimize the disbenifits.