American Journal of Applied Sciences

Business Cycle Synchronization Between Australia and New Zealand

Jie Wei, Minsoo Lee and Christopher Gan

DOI : 10.3844/ajassp.2007.1045.1053

American Journal of Applied Sciences

Volume 4, Issue 12

Pages 1045-1053

Abstract

There has been a high degree of economic and financial integration between Australia and New Zealand with free trade agreements linking the capital and labor markets. Given a strong economic relationship, business-cycle transmission is expected to exist between the two countries. By analyzing the shock-transmission channels via trade, monetary policy, and exchange rates between Australia and New Zealand we can infer that if Australia and New Zealand trade less, have more similar monetary policy structure, or have less similar economic structures they would have stronger economy correlation. The results also show that the highly integrated banking system between Australia and New Zealand is an additional avenue for shock transmission between both countries.

Copyright

© 2007 Jie Wei, Minsoo Lee and Christopher Gan. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.