What is Recoupling

This chapter focuses on the decoupling hypothesis between emerging countries and the advanced world. On the basis of quarterly seasonally adjusted data over the period 1995q1–2014q1 we present some evidence in favor of a decreasing vulnerability of emerging market economies to global economic and financial development, particularly convincing for Asian countries. Results confirm a common finding in the related literature: The acute phase of the financial crisis triggered by the US mortgage crisis corresponds to a period of substantial increase in business cycle synchronization, arguably determined by the synchronized trade collapse and foreign credit retrenchment, although in the aftermath of the global financial crisis, all the different groups of emerging economies started to decouple again from the United States, and also relative to the Eurozone and to Japan. Therefore, extending the time span to recent data allows us to envisage the recoupling phase with respect to the United States' business cycle as a temporary halt over a long-run decoupling initiated a decade ago.