Impact of sub-national synchronization on the behavior of national business cycles in emerging economies with inflation targeting

Purpose - The purpose of this paper is to assess sub-national business cycle (BC) synchronization's impact on national cycles in four emerging markets economies with inflation targeting (IT-EMEs): Brazil, Colombia, South Korea and Mexico. Design/methodology/approach - The authors use panel data models with fixed-effects and distributed lags. Findings - The authors disclosed that sub-national synchronization increased national cycle amplitudes during expansion and recession phases. The authors also noticed that South Korea exhibited a more pronounced effect compared to Latin American countries, and this seemed to be associated with differences in the homogeneity of the production structures in the regions of these countries. Research limitations/implications - The authors cautioned that contrasting the findings with prior research on the effects of regional BC synchronization in IT-EMEs or with studies in different geographical contexts, is not possible due to the absence of prior research endeavors with this specific focus. Originality/value - This study constitutes a first attempt to explain the impact of subnational cycle synchronization on the magnitude of national cycles in four IT-EMEs.