To identify the trade linkages of business cycles between advanced and emerging economies and study the time evolution of linkages with degree of integration

Abstract

Business cycles of countries are becoming increasing correlated and dependent on each other. This leads to the co-movements in the business cycles of one country with that of the other. This phenomenon has been greatly noted in business cycles of emerging countries whose business cycles move in sync with that of the developed countries. These business cycles can be easily noticed in case of shocks that are transmitted from one country to other. E.g. Financial Crisis of 2008. In the work done on business cycle co-movements during Term-4 CCS, we found that one of the factors leading to the integration of business cycles is trade. Continuing our work in Term-4 CCS, we wanted to identify the key traded goods across countries over a period of 20 years. Our hypothesis was identify any significant changes in the trade basket of the two countries. The source of the data for the analysis is UN Comtrade data set at the HS2 classification of goods.