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Integration Interrupted : The Impact of September 11, 2001

Author

Listed:
  • Ghoshal, Animesh

    (DePaul University)

  • Lipovic, Lauren

    (DePaul University)

  • Sido, Matthew

    (DePaul University)

Abstract

The economies of Canada and the United States, closely linked for many years, began a formal process of tighter integration with the Canada–United States Free Trade Agreement (1989) and North American Free Trade Agreement (1994). Due to the ease of border crossing, American and Canadian consumers took advantage of exchange rate variations to engage in cross-border shopping, implying a movement toward unified markets in the border regions. This process of integration was interrupted by tighter border controls after the terrorist attacks of 9/11. In this paper, we investigate the disruption of normal patterns of day tripping across the US-Canadian border. Using seasonally adjusted monthly data for the period 1994~2011, we show a robust relationship between the exchange rate and the flow of day trippers in each direction, implying cross-border shopping to be a major motive for day trippers. Using dummy variables to represent the security measures enacted in September 2001, and the stricter documentation required after January 2008, we show that both sets of measures significantly reduced cross-border trips and thickened the border.

Suggested Citation

  • Ghoshal, Animesh & Lipovic, Lauren & Sido, Matthew, 2015. "Integration Interrupted : The Impact of September 11, 2001," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 30, pages 66-92.
    • Handle: RePEc:ris:integr:0652
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    Citations

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    Cited by:

    1. John Berdell & Animesh Ghoshal, 2015. "US–Mexico border tourism and day trips: an aberration in globalization?," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 24(1), pages 1-18, December.
    2. Smith, Matthew J. & Ray, Sayan Basu & Raymond, Aaron & Sienna, Micah & Lilly, Meredith B., 2018. "Long-term lessons on the effects of post-9/11 border thickening on cross-border trade between Canada and the United States: A systematic review," Transport Policy, Elsevier, vol. 72(C), pages 198-207.

    More about this item

    Keywords

    Cross-border Shopping; Economic Integration; Exchange Rates; Post 9/11 Security Measures;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism

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