Sensitivities of Southeast Asian industries to the local and global business cycles
International Journal of Emerging Markets
ISSN: 1746-8809
Article publication date: 29 January 2021
Issue publication date: 24 November 2022
Abstract
Purpose
This paper estimates the sensitivities of the output of the manufacturing industries of the four Southeast countries (Indonesia, Malaysia, Philippines, Singapore) to both the country-specific and global business cycle fluctuations. The study investigates whether the business cycle exposures of these industries differ to their nature classified as producing durable or nondurable goods and also to booms and recessions.
Design/methodology/approach
Using annual time series data on sectoral manufacturing production indices for major manufacturing industries over the period from 1999 to 2018, this paper uses the seemingly unrelated regression (SUR)–based generalized least square estimator to estimate the exposures of each industry for each of the four countries to local and world business cycle.
Findings
The individual country analysis indicates that generally the sensitivities of the ASEAN manufacturing industries to booms and recessions are different from the pattern observed in the developed countries and Russia. We do not find evidence consistent with the commonly held view among economists and business managers that demand for durable goods flourishes in booms and falls in recessions. Also, very few industries exhibit an asymmetric reaction to booms and busts. However, the analysis of panel data reveals the expected pattern of industrial sensitivities to the local business cycle only.
Originality/value
The paper makes several contributions. Firstly, the model proposed in the paper estimates sensitivities of industries to both the local and global business cycle variations. Secondly, the model enables us to explicitly test the asymmetric reaction of industries to booms and busts. Thirdly, the paper is the first attempt to estimating business cycle exposures for manufacturing industries in emerging markets.
Keywords
Acknowledgements
The author thankfully acknowledges the suggestions for improvement from the associate editor and three reviewers.
Citation
Iqbal, J. (2022), "Sensitivities of Southeast Asian industries to the local and global business cycles", International Journal of Emerging Markets, Vol. 17 No. 8, pp. 1998-2023. https://doi.org/10.1108/IJOEM-08-2020-0884
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited