Pacific rim business cycle analysis: Dating, volatility and synchronisation

Abstract

We report preliminary results from analytical work on business cycle turning points, volatility, and synchronisation for New Zealand and its major (Pacific Rim) trading partners. Principal conclusions are that: New Zealand's (real GDP) business cycles have been synchronised primarily with those of the "Pacific Rim" countries of Australia and the United States of America, rather than with any "European cycle" associated with (West) Germany or with Japanese cycles. It seems too soon to be able to establish meaningful business cycle synchronisations between New Zealand and any of China, Korea, Taiwan, Hong Kong and Singapore, despite the current importance of the latter countries as trading partners for New Zealand. There was a clear disturbance during the mid-to late-1980s of New Zealand's strong procyclical business cycle synchronisation with both Australia and the US. The fast growing Asian economies of China, Hong Kong, Korea and Singapore have displayed the highest business cycle volatilities; New Zealand and Taiwan have also recorded high volatility on average; while Australia, the US, West Germany and Japan have displayed relatively lower average volatility. With the possible exception of New Zealand (and Japan), this is consistent with the high growth rate countries exhibiting high business cycle volatility and our lower growth rate countries displaying relatively lower volatility. Business cycle volatility has varied over time for all countries, with the possible exception of Japan. The volatilities of China, Korea, Taiwan and Singapore having been moving steadily lower over time.