International co-movements and business cycle transmission between Korea and Japan

This study examines the economic relationship and interdependence between Korea and Japan. Using macroeconomic data, an event chronology, and trade flows, I examine the question, are business cycles transmitted from Japan to Korea, and/or from Korea to Japan? And, how has that transmission changed over time? The study uses structured vector autoregressions (SVARs) to analyze monthly data 1960.01-2002.01 on industrial production, prices, interest rates, money supplies, and exchange rates. Japanese business cycles are found to have a moderate effect upon business cycle fluctuations in Korea, and that influence seems to be increasing over time. (C) 2003 Elsevier Inc. All rights reserved.