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Trade Agreements and International Comovements: the Case of NAFTA (North American Free Trade Agreement)

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  • Maria Bejan

    (Rice University)

Abstract

Business cycles correlation between Mexico and the US changed from being on a downward sloping path before 1992 to an upward sloping path after that. This paper suggests that the North American Free Trade Agreement could be the explanation. NAFTA generated not only an increase in the volume of trade but also a change in the elasticity of substitution between imports and exports. The paper tests this hypothesis using the neoclassical business cycles model. Although there are still some discrepancies between the theory and data in the degree of correlation, the direction of change in the model corresponds to the one in the data. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2011.06.003
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 14 (2011)
Issue (Month): 4 (October)
Pages: 667-685

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Handle: RePEc:red:issued:07-86

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Keywords: NAFTA; International business cycles; Comovements;

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References

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Cited by:
  1. Francisco Callado & Jana Hromcová & Natalia Utrero, 2012. "Openness and Technology Diffusion in Payment Systems: The Case of NAFTA," Working Papers, Department of Applied Economics at Universitat Autonoma of Barcelona wpdea1206, Department of Applied Economics at Universitat Autonoma of Barcelona.
  2. Hideaki Hirata & M. Ayhan Kose & Christopher Otrok, 2013. "Regionalization vs. Globalization," IMF Working Papers, International Monetary Fund 13/19, International Monetary Fund.
  3. Emilio Espino & Julian Kozlowski & Juan M. Sánchez, 2013. "Regionalization vs. globalization," Working Papers, Federal Reserve Bank of St. Louis 2013-002, Federal Reserve Bank of St. Louis.

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