Are Asian Business Cycles Different?

This paper studies the unusual features of emerging economy business cycles in Asia. When we assess whether approaches from the previous literature can explain Asian business cycles, we conclude that standard models based on permanent growth shocks do not replicate key features of Asian business cycles. The evidence suggests that different transmission mechanisms explain the connections between consumption, net exports, and export or import in Latin America and Asia. For evidence of a special transmission mechanism, we study durable goods business cycles in Asia (Korea), noting that strong pro-cyclical durable goods consumption may be explained by the export-income channel coupled with market laddering by which firms have expanded the variety and quality of their durable goods production. © 2013 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.