International transmission of business cycles to Turkey

International transmission of business cycles to TurkeyThis study aims to identify, the business cycles of countries that show strong interdependencies with Turkish business cycle in terms of the degrees of their co-movements and transmissions, employing Longest Common Subsequence (LCS). Using a sample of 32 countries, business cycle components are derived from industrial production indices of each country with an application of HP filtering: LCS is performed in order to obtain the degrees of business cycle synchronization and transmission and the countries are clustered to find out the extent to which group of country business cycles are synchronized with and transmitted to Turkish business cycle. The results indicate that the business cycles of the US, Japan, UK, Canada and South Korea are strongly transmitted to Turkish business cycle. In addition, it is found that Turkish business cycle is highly synchronized with central European countries except for Greece, Portugal, Czech Republic, Slovakia and Ireland.