The importance of intra-industry trade to the convergence in the EU and euro area and implications for Slovakia

Assuming the validity of the endogeneity hypothesis of the Optimum Currency Area (OCA) theory, with the deepening integration of countries, where so far the highest stage in the EU is the economic and monetary union, the synchronization of business cycles should increase and the frequency of asymmetric shocks should decrease. However, this should occur on condition that in the integration group the intra-industry trade (IIT) has a significant share in total bilateral trade of economies. Higher range of IIT should ultimately raise the benefits and reduce the costs of economies in the monetary union. In this paper the development of similarities in trade structures of the EU economies is examined and following that the conclusions are derived for convergence in terms of the OCA theory with focus on Slovakia. To express the size of the IIT in this paper the Grubelov-Lloyd index is used and the analysis is completed with the indicator of differences in export structures, which is the component indicator of the Optimum Currency Area index (OCA index). The aim of this paper is to determine trends in the development of intra-industry trade in the EU’s economies and to Význam vnútroodvetvového obchodu pre konvergenciu v rámci EÚ a eurozóny a implikácie pre Slovensko The importance of intra-industry trade to the convergence in the EU and euro area and implications for Slovakia Magdaléna Drastichová | magdalena.drastichova@vsb.cz Katedra regionální a environmentální ekonomiky, Ekonomická fakulta, VŠB - TU Ostrava draw impacts on convergence of the Slovak economy to the EU and on the participation in the monetary union.