Economic Fluctuations: Business Cycles in Central Asia and Russian Federation

Term Paper

Economic Fluctuations: Business Cycles in Central Asia and Russian Federation

Table of Content

1. Introduction 3

2. Data 3

3. Business Cycles in Central Asia and the Russian Federation: Empirical Results 5

3.1 Persistence 5

3.2 Volatility 6

4. Cross-correlations with real GDP 8

4.1 Consumption and investment 9

4.2 Government expenditure 9

4.3 Monetary aggregates and prices 9

4.4 Remittances 11

5. Conclusions and Policy Implications 11

References 13

1. Introduction

This paper provides business cycle (BC) facts for Kyrgyzstan, Kazakhstan and Tajikistan, and their important economic partner; the Russian Federation.1 BCs are defined as periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real Gross Domestic Product (GDP) or industrial output and other macroeconomic variables. The paper also attempts to provide answers to the following questions: What is the extent of BCs synchronization across countries? Is there increasing regional economic integration across countries? What are the natures of shocks that cause cyclical fluctuations in these countries? Are they similar? Why is it important to study BC features of a country? First, BC facts help us understand what drives fluctuations in the economies of countries, such as supply or demand shocks. Establishing the nature of shocks can help decision-makers decide what the most appropriate policy is to smooth out cyclical fluctuations. Additionally, BC facts can also help decision-makers assess the role of fiscal and monetary policies in mitigating or aggravating aggregate fluctuations and discusses data.

2. Data

The data for the countries under consideration - Kyrgyzstan, Tajikistan, Kazakhstan and the Russian Federation - are quarterly and cover the period from the first quarter of 2000 through the fourth quarter of 2011. The data come mainly from national statistics offices and national/central banks, as well...