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Article
Publication date: 24 January 2022

Abigail Naa Korkor Adjei, George Tweneboah and Peterson Owusu Junior

The purpose of this paper is to investigate the interdependence between economic policy uncertainty (EPU) and business cycles within and among six emerging market economies (EMEs…

Abstract

Purpose

The purpose of this paper is to investigate the interdependence between economic policy uncertainty (EPU) and business cycles within and among six emerging market economies (EMEs) from January 1999 to December 2018.

Design/methodology/approach

This study adopts the wavelet multiple correlations and wavelet multiple cross-correlation (WMCC) based on the maximal overlap discrete transform estimator. This methodology simultaneously investigates how two or more time series variables move together continuously at both time and frequency domains.

Findings

The empirical results show that business cycles comove with EPU for both intra- and inter-country analysis, with the long term showing the greatest degree of interdependence. In intra-country comparisons, EPU has a positive correlation with consumer price index and a negative correlation with share price index. According to the WMCC results, EPU does not have any leading or lagging power within each EME, but rather import has both lead and lag power. The inter-country WMCC results are all significant, with Korea’s EPU leading/following all EMEs across all scales.

Originality/value

This study contributes to the ongoing debate about what causes business cycles to comove by investigating business cycle indicators (leader/follower) using a robust wavelet methodology. The authors propose new variables that can clearly reflect the outcome of economic policy actions and translate information about EPU shocks. The inclusion of the variables has altered the understanding of the relationship between EPU and business cycle fluctuations. Policymakers also gain new insights into the trends and patterns of EPU and business cycles, which will help them formulate and implement fiscal and monetary policies more effectively.

Details

Journal of Financial Economic Policy, vol. 14 no. 5
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 1 October 1997

Kunhong Kim and Yong‐Yil Choi

Seeks to present the detailed empirical study of contemporary business fluctuations in Korea. Follows the methodology of modern business cycle research in conducting an…

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Abstract

Seeks to present the detailed empirical study of contemporary business fluctuations in Korea. Follows the methodology of modern business cycle research in conducting an atheoretical statistical analysis of the cyclical properties of key aggregate time series. Shows, by analysis, that many of the cyclical regularities documented for developed countries also exist in Korean business cycles. Regularities include the relative volatilities of many expenditure components and the co‐movement of real and nominal variables with output. Particularly of note is the counter‐cyclicality of prices. Posits that counter‐cyclicality of prices signals the importance of supply side shocks in Korean business fluctuations. Reveals, in the analysis, that the fluctuation in the import price of oil may have been the major source of Korean business cycles. States that analysis has also revealed that there are some idiosyncrasies in Korean business cycles. Net exports are significantly pro‐cyclical and lead the cycle for most of the period under study.

Details

Journal of Economic Studies, vol. 24 no. 5
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 8 May 2017

Bijan Bidabad and Abul Hassan

This paper aims to study the structural dynamic behaviour of the depositors, banks and investors and the role of banks in the business cycles. The authors test the hypothesis: do…

Abstract

Purpose

This paper aims to study the structural dynamic behaviour of the depositors, banks and investors and the role of banks in the business cycles. The authors test the hypothesis: do banks’ behaviour make oscillations in the economy via interest rate?

Design/methodology/approach

The authors dichotomized banking activities into two markets: deposit and loan. The first market forms deposit interest rate, and the second market forms credit interest rate. The authors show that these two types of interest rates have non-synchronized structures, and that is why money sector fluctuation starts. As a result, the fluctuation is transferred to the real economy through saving and investment functions.

Findings

The empirical results show that in the USA, the banking system creates fluctuations in money and real economy, as well as through interest rates. Short-term interest rates had complex roots in their characteristic, while medium and long-term interest rates, though they were second-order difference equations, had real characteristic roots. However, short-term interest rates are the source of oscillation and form the business cycles.

Research limitations/implications

The authors tested the hypothesis for USA economy, while it needs to be tested for other economies as well.

Practical implications

The results show that though the source of fluctuations in the real economy comes from short-term interest rates, medium- and long-term interest rates dampen real economy fluctuations and also work as economic stabilisers.

Originality/value

Regarding the applied method, the topic is new.

Details

Journal of Financial Regulation and Compliance, vol. 25 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 29 January 2021

Javed Iqbal

This paper estimates the sensitivities of the output of the manufacturing industries of the four Southeast countries (Indonesia, Malaysia, Philippines, Singapore) to both the…

Abstract

Purpose

This paper estimates the sensitivities of the output of the manufacturing industries of the four Southeast countries (Indonesia, Malaysia, Philippines, Singapore) to both the country-specific and global business cycle fluctuations. The study investigates whether the business cycle exposures of these industries differ to their nature classified as producing durable or nondurable goods and also to booms and recessions.

Design/methodology/approach

Using annual time series data on sectoral manufacturing production indices for major manufacturing industries over the period from 1999 to 2018, this paper uses the seemingly unrelated regression (SUR)–based generalized least square estimator to estimate the exposures of each industry for each of the four countries to local and world business cycle.

Findings

The individual country analysis indicates that generally the sensitivities of the ASEAN manufacturing industries to booms and recessions are different from the pattern observed in the developed countries and Russia. We do not find evidence consistent with the commonly held view among economists and business managers that demand for durable goods flourishes in booms and falls in recessions. Also, very few industries exhibit an asymmetric reaction to booms and busts. However, the analysis of panel data reveals the expected pattern of industrial sensitivities to the local business cycle only.

Originality/value

The paper makes several contributions. Firstly, the model proposed in the paper estimates sensitivities of industries to both the local and global business cycle variations. Secondly, the model enables us to explicitly test the asymmetric reaction of industries to booms and busts. Thirdly, the paper is the first attempt to estimating business cycle exposures for manufacturing industries in emerging markets.

Details

International Journal of Emerging Markets, vol. 17 no. 8
Type: Research Article
ISSN: 1746-8809

Keywords

Open Access
Article
Publication date: 19 September 2023

Cleyton Farias and Marcelo Silva

The authors explore the hypothesis that some movements in commodity prices are anticipated (news shocks) and can trigger aggregate fluctuations in small open emerging economies…

Abstract

Purpose

The authors explore the hypothesis that some movements in commodity prices are anticipated (news shocks) and can trigger aggregate fluctuations in small open emerging economies. This paper aims to discuss the aforementioned objective.

Design/methodology/approach

The authors build a multi-sector dynamic stochastic general equilibrium model with endogenous commodity production. There are five exogenous processes: a country-specific interest rate shock that responds to commodity price fluctuations, a productivity (TFP) shock for each sector and a commodity price shock. Both TFP and commodity price shocks are composed of unanticipated and anticipated components.

Findings

The authors show that news shocks to commodity prices lead to higher output, investment and consumption, and a countercyclical movement in the trade-balance-to-output ratio. The authors also show that commodity price news shocks explain about 24% of output aggregate fluctuations in the small open economy.

Practical implications

Given the importance of both anticipated and unanticipated commodity price shocks, policymakers should pay attention to developments in commodity markets when designing policies to attenuate the business cycles. Future research should investigate the design of optimal fiscal and monetary policies in SOE subject to news shocks in commodity prices.

Originality/value

This paper contributes to the knowledge of the sources of fluctuations in emerging economies highlighting the importance of a new source: news shocks in commodity prices.

Details

EconomiA, vol. 24 no. 2
Type: Research Article
ISSN: 1517-7580

Keywords

Article
Publication date: 10 April 2017

Radhika Pandey, Ila Patnaik and Ajay Shah

This paper aims to present a chronology of Indian business cycles in the post-reform period. In India, earlier, macroeconomic shocks were about droughts and oil prices. Economic…

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Abstract

Purpose

This paper aims to present a chronology of Indian business cycles in the post-reform period. In India, earlier, macroeconomic shocks were about droughts and oil prices. Economic reforms have led to an interplay of a market economy, financial globalisation and decisions of private firms to undertake investment and hold inventory. This has changed the working of the business cycle and has raised concerns about business-cycle stabilisation. In the backdrop of these developments, the macroeconomics research agenda requires foundations of measurement about business-cycle phenomena. One element of this is the identification of dates of business-cycle turning points.

Design/methodology/approach

This paper uses the growth-cycle approach to present the chronology of business cycles. The paper uses the Christiano–Fitzgerald (CF) filter to extract the cyclical component and shows the robustness of the findings to the contemporary methods of cycle extraction. It then applies the Bry–Boschan algorithm to identify the dates of peaks and troughs.

Findings

The paper finds three periods of recession. The first recession was from 1999-Q4 to 2003-Q1; the second recession was from 2007-Q2 to 2009-Q3; and the third recession ran from 2011-Q2 till 2012-Q4. These results are robust to the choice of filter and to the choice of the business-cycle indicator. These dates suggest that, on average, expansions in India are 12 quarters in length and recessions run for 9 quarters. The paper offers evidence of change in the nature of cycles.

Originality/value

Dates of business-cycle turning points are a critical input for academic and policy work in macroeconomics. The paper offers robust estimation of the business-cycle turning points in the post-reform period using contemporary techniques of cycle extraction. This work helps lay the foundations for downstream macroeconomics research by academicians and policymakers.

Details

Indian Growth and Development Review, vol. 10 no. 1
Type: Research Article
ISSN: 1753-8254

Keywords

Article
Publication date: 4 August 2020

Peterson K. Ozili

This study aims to investigate the relationship between financial inclusion and the business cycle.

Abstract

Purpose

This study aims to investigate the relationship between financial inclusion and the business cycle.

Design/methodology/approach

Regression methodology is used to analyze the association between financial inclusion and the business cycle.

Findings

Using regression estimation, the findings reveal that the level of savings and the number of active formal account ownership are pro-cyclical with fluctuations in the business cycle. Also, savings by adults particularly for women and poor people declines during recessionary periods while the number of active formal account ownership declines for the adult population especially for women during recessionary periods. The findings also reveal that not all indicators of financial inclusion are pro-cyclical with fluctuating business cycles.

Practical implications

The implication of this observed pro-cyclical effect is that individuals and households will exit the formal financial sector during a recession, as banks become unwilling to lend money to individuals and households during bad times and this will lead to financial exclusion and vice versa. Policymakers seeking to increase the level of financial inclusion in their countries should focus on the timing of financial inclusion policies along the business cycle as the findings suggest that it might be more difficult to achieve financial inclusion objectives during recessions or periods of economic downturns.

Originality/value

The current debate on financial inclusion pays little attention to whether financial inclusion is pro-cyclical with the fluctuating business cycle. This study explores the association between financial inclusion and the business cycle.

Article
Publication date: 1 July 2005

Michael S.H. Heng, Yu Chung William Wang and Xianghua He

The purpose of this research note is to investigate the implications of supply chain management of e‐business for the macroeconomic phenomenon of business cycles.

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Abstract

Purpose

The purpose of this research note is to investigate the implications of supply chain management of e‐business for the macroeconomic phenomenon of business cycles.

Design/methodology/approach

The paper provides a list of propositions, which form the broad basis of an empirical research agenda, to explore and investigate the mechanisms through which supply chain innovations can influence business cycle.

Findings

Economic research literature has pointed out that there are linkages between inventory investment and business cycle fluctuation. Given that the e‐business supply chain management drastically alters inventory investment across a range of industries, it is likely to affect the behaviour of economic fluctuation.

Originality/value

This research has the potential to contribute to a better‐informed formulation of economic policies at national and global level.

Details

Supply Chain Management: An International Journal, vol. 10 no. 3
Type: Research Article
ISSN: 1359-8546

Keywords

Book part
Publication date: 8 March 2011

Shawn Chen-Yu Leu and Jeffrey Sheen

We consider whether there has been a gradual decoupling of the Australian business cycle from its trading partners in Europe and North America and a closer convergence toward its…

Abstract

We consider whether there has been a gradual decoupling of the Australian business cycle from its trading partners in Europe and North America and a closer convergence toward its trading partners in Asia. We set up a dynamic latent factor model to estimate common dynamic components or factors for the real GDP growth rate of 19 countries. From variance decomposition over the 1991–2009 sample, we find that a global factor contributed the most in explaining Australian output growth variations, followed by a European factor, an Asian factor, and finally a North American factor. However, the correlation between Australian output growth movements and the Asian business cycle factor evolved from negative and small to positive and large after 2002. The European and North American factors were negatively correlated with Australian output growth for most of the sample period before turning positive in the global financial crisis of 2007–2008. This evidence supports the hypothesis that the Australian economy has decoupled to some extent from Europe, was not much coupled with North America except insofar as the United States drove the global factor, and has increasingly become positively coupled with Asia.

Article
Publication date: 14 May 2018

Foluso Abioye Akinsola and Sylvanus Ikhide

This paper aims to examine the relationship between commercial bank lending and business cycle in South Africa. This paper attempts to know whether commercial bank lending in…

Abstract

Purpose

This paper aims to examine the relationship between commercial bank lending and business cycle in South Africa. This paper attempts to know whether commercial bank lending in South Africa is procyclical.

Design/methodology/approach

The model assumed that the lending behaviour is related to the business cycle. In this study, vector error correction model (VECM) is used to capture the relationship between bank lending and business cycle to accurately elicit the macroeconomic long-run relationship between business cycle and bank lending, as some banks might slow down bank lending due to some idiosyncratic factors that are not related to the downturn in the economy. This paper uses data from South African Reserve Bank for the period of 1990-2015 using VECM to understand the extent to which business cycle fluctuation can affect credit crunch in the financial system. The Johansen cointegration approach is used to ascertain whether there is indeed a long-run co-movement between credit growth and business cycle.

Findings

Results from the VECM show that there are significant linkages among the variables, especially between credit to gross domestic product (GDP) and business cycle. The influence of business cycle is seen vividly after a period of four to five years, where business cycle explains 20 per cent of the variation in the credit to GDP. South African banks tend to change their lending behaviour during upturns and downturns. This result further confirms the assertion in theory that credit follows business cycle and can amplify credit crunch. The result shows that in the long run, fluctuations in the business cycle can influence the credit growth in South Africa.

Research limitations/implications

The impulse analysis result shows that the impact of business cycle shock is very persistent and lasting. This also demonstrates that the shocks to the business cycle result have a persistent and long-lasting impact on credit. This study finds that commercial bank lending in South Africa is procyclical. It is suggested that the South African economy needs forward-looking policies that will mitigate the flow of credit to the real sector and at the same time ensure financial stability.

Originality/value

Most research papers rarely distinguish between the demand side and supply side of credit procyclicality. This report is presented to develop an econometric model that will examine demand side procyclicality. This study adopts more realistic and novel methods that will help in explaining the relationship between bank lending and business cycle in South Africa, especially after the global financial crisis. This report is presented with a concise and detailed analysis and interpretation.

Details

Journal of Financial Regulation and Compliance, vol. 26 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

1 – 10 of over 8000