This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Real Convergence and Euro Adoption in Central and Eastern Europe: Trade and Business Cycle Correlations as Endogenous Criteria for Joining EMU

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Frankel, Jeffrey (Harvard U)

Additional information is available for the following registered author(s):

Abstract

Optimum currency area theory says that trade patterns and cyclical correlations are important criteria for whether a country should join a monetary area such as EMU. But these criteria are endogenous. Recent econometric estimates suggest that currency unions have far greater effects on trade patterns than previously believed. Since currency unions are good for trade, and trade is good for growth, that is one major argument in favor of adopting the euro. There are the usual countervailing arguments for retaining monetary independence, particularly the famous asymmetric shocks. But the pattern of shocks is also endogenous. For the countries of Central and Eastern Europe joining the EU in 2004, one risk-averse argument for joining later, but not necessarily yet, is that trade with euroland can be expected to continue increasing. Econometric estimates suggest that the growing trade links will in turn lead to growing cyclical correlation, that is, to cyclical convergence. The implication is that the new EU members may better qualify for the optimum currency area criteria in the future, even in just five years, than they do as of today. Another kind of convergence, income convergence, is also relevant, but will take too long to wait for.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ksgnotes1.harvard.edu/Research/wpaper.nsf/rwp/RWP04-039/$File/rwp_04_039_Frankel2.pdf
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp04-039.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:ecl:harjfk:rwp04-039

Contact details of provider:
Postal: 79 JFK Street, Cambridge, MA 02138
Fax: 617-496-2554
Web page: http://www.ksg.harvard.edu/research/working_papers/index.htm
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
  2. Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Costas Megir & Danny Quah, 1996. "Regional Convergence Clusters Across Europe," CEP Discussion Papers dp0274, Centre for Economic Performance, LSE. [Downloadable!]
  4. Barry Eichengreen & Douglas A. Irwin, 1998. "The Role of History in Bilateral Trade Flows," NBER Chapters, in: The Regionalization of the World Economy, pages 33-62 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  5. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 7-46, 04. [Downloadable!] (restricted)
  6. Goldberg, Pinelopi & Verboven, Frank, 2001. "Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market," CEPR Discussion Papers 2926, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," International Trade 0103003, EconWPA. [Downloadable!]
    Other versions:
  8. David C. Parsley & Shang-Jin Wei, 2001. "Limiting Currency Volatility to Stimulate Goods Market Integration: A Price-Based Approach," IMF Working Papers 01/197, International Monetary Fund. [Downloadable!]
    Other versions:
  9. Ignazio Angeloni & Luca Dedola, 1999. "From the ERM to the euro: new evidence on economic and policy convergence among EU countries," Working Paper Series 4, European Central Bank. [Downloadable!]
    Other versions:
  10. Alejandro Micco & Ernesto Stein & Guillermo OrdoÒez, 2003. "The currency union effect on trade: early evidence from EMU," Economic Policy, CEPR, CES, MSH, vol. 18(37), pages 315-356, October. [Downloadable!] (restricted)
    Other versions:
  11. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. M. Ayhan Kose & Kei-Mu Yi, 2001. "International Trade and Business Cycles: Is Vertical Specialization the Missing Link?," American Economic Review, American Economic Association, vol. 91(2), pages 371-375, May. [Downloadable!] (restricted)
  13. Zsolt Darvas & György Szapáry, 2008. "Business Cycle Synchronization in the Enlarged EU," Open Economies Review, Springer, vol. 19(1), pages 1-19, February. [Downloadable!] (restricted)
    Other versions:
  14. Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  15. Charles Engel & John H. Rogers, 1995. "How wide is the border?," Research Working Paper 95-09, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  16. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate Of The Effect Of Common Currencies On Trade And Income," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 437-466, May. [Downloadable!] (restricted)
    Other versions:
  17. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June. [Downloadable!] (restricted)
  18. John H. Rogers, 2001. "Price level convergence, relative prices, and inflation in Europe," International Finance Discussion Papers 699, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  19. Fidrmuc, Jarko, 2001. "The Endogeneity of optimum currency area criteria, intraindustry trade and EMU enlargement," BOFIT Discussion Papers 8/2001, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  20. David E. Bloom & David Canning & Jaypee Sevilla, 2002. "Technological Diffusion, Conditional Convergence, and Economic Growth," NBER Working Papers 8713, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  21. Havrylyshyn, Oleh & Pritchett, Lant, 1991. "European trade patterns after the transition," Policy Research Working Paper Series 748, The World Bank. [Downloadable!]
  22. Fatas, Antonio, 1997. "EMU: Countries or regions? Lessons from the EMS experience," European Economic Review, Elsevier, vol. 41(3-5), pages 743-751, April. [Downloadable!] (restricted)
    Other versions:
  23. Jeffrey A. Frankel and Shang-Jin Wei., 1995. "European Integration and the Regionalization of World Trade and Currencies: The Economics and the Politics," Center for International and Development Economics Research (CIDER) Working Papers C95-053, University of California at Berkeley.
  24. Jarko Fidrmuc, 2001. "The Endogeneity of the Optimum Currency Area Criteria, Intraindustry Trade, and EMU Enlargement," LICOS Discussion Papers 10601, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
    Other versions:
  25. Boone, Laurence & Maurel, Mathilde, 1998. "Economic Convergence of the CEECs with the EU," CEPR Discussion Papers 2018, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  26. Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April. [Downloadable!] (restricted)
  27. Andrew K. Rose, 2001. "Currency unions and trade: the effect is large," Economic Policy, CEPR, CES, MSH, vol. 16(33), pages 449-461, October. [Downloadable!] (restricted)
  28. César Calderón & Alberto Chong & Ernesto H. Stein, 2003. "Trade Intensity and Business Cycle Synchronization: Are Developing Countries any Different?," RES Working Papers 4315, Inter-American Development Bank, Research Department. [Downloadable!]
    Other versions:
  29. Artis, Michael J & Zhang, Wenda, 1995. "International Business Cycles and the ERM: Is there a European Business Cycle?," CEPR Discussion Papers 1191, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  30. Imbs, Jean, 2003. "Trade, Finance, Specialization and Synchronization," CEPR Discussion Papers 3779, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  31. Volker Nitsch, 2000. "National borders and international trade: evidence from the European Union," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 1091-1105, November. [Downloadable!] (restricted)
  32. Maurice J.G. Bun & Franc J.G.M. Klaassen, 2002. "Has the Euro increased Trade?," Tinbergen Institute Discussion Papers 02-108/2, Tinbergen Institute. [Downloadable!]
  33. Peter Backé & Christian Thimann & Olga Arratibel & Oscar Calvo-Gonzalez & Arnaud Mehl & Carolin Nerlich, 2004. "The acceding countries’ strategies towards ERM II and the adoption of the euro - an analytical review," Occasional Paper Series 10, European Central Bank. [Downloadable!]
  34. Ben-David, Dan, 1996. "Technological Convergence and International Trade," CEPR Discussion Papers 1359, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  35. Baldwin, Richard & Martin, Philippe & Ottaviano, Gianmarco Ireo Paolo, 1998. "Global Income Divergence, Trade and Industrialization: The Geography of Growth Take-Offs," CEPR Discussion Papers 1803, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  36. Sebnem Kalemli-Ozcan & Bent E. Sørensen & Oved Yosha, 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," Working Papers 99-16, Brown University, Department of Economics.
    Other versions:
  37. Jean IMBS, 1998. "Co-Fluctuations," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9819, Université de Lausanne, Faculté des HEC, DEEP. [Downloadable!]
    Other versions:
  38. Kalemli-Ozcan, Sebnem & Sorensen, Bent E. & Yosha, Oved, 2001. "Economic integration, industrial specialization, and the asymmetry of macroeconomic fluctuations," Journal of International Economics, Elsevier, vol. 55(1), pages 107-137, October. [Downloadable!] (restricted)
  39. Hugh Rockoff, 2000. "How Long Did It Take the United States to Become an Optimal Currency Area?," NBER Historical Working Papers 0124, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  40. Hamilton, C.B. & Winters, L.A., 1992. "Opening Up International Trade in Eastern Europe," Papers 511, Stockholm - International Economic Studies.
  41. Jeffrey A. Frankel & Shang-Jin Wei, 1993. "Emerging Currency Blocs," NBER Working Papers 4335, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  42. Torres, Alberto & Vela, Oscar, 2003. "Trade integration and synchronization between the business cycles of Mexico and the United States," The North American Journal of Economics and Finance, Elsevier, vol. 14(3), pages 319-342, December. [Downloadable!] (restricted)
  43. Laura Bottazzi & Giovanni Peri, . "Innovation, Demand and Knowledge Spillovers: Theory and Evidence from European Regions," Working Papers 153, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
    Other versions:
  44. Honkapohja, Seppo & Pikkarainen, Pentti, 1992. "Country Characteristics and the Choice of the Exchange Rate Regime: Are Mini-skirts Followed by Maxis?," CEPR Discussion Papers 744, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  45. David C. Parsley & Shang-Jin Wei, 2000. "Explaining the Border Effect: The Role of Exchange Rate Variability, Shipping Costs, and Geography," NBER Working Papers 7836, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  46. Boone, Laurence & Maurel, Mathilde, 1999. "An Optimal Currency Area Perspective of the EU Enlargement to the CEECs," CEPR Discussion Papers 2119, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  47. Babetskii, Ian & Boone, Laurence & Maurel, Mathilde, 2002. "Exchange Rate Regimes and Supply Shocks Asymmetry: The Case of the Accession Countries," CEPR Discussion Papers 3408, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  48. Todd E. Clark & Eric van Wincoop, 1999. "Borders and business cycles," Research Working Paper 99-07, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  49. Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Darvas, Zsolt & Szapáry, György, 2005. "Business Cycle Sychronization in the Enlarged EU," CEPR Discussion Papers 5179, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Viviana Fernandez & Ali M. Kutan, 2005. "Do Regional Integration Agreements Increase Business-Cycle Convergence? Evidence From APEC and NAFTA," William Davidson Institute Working Papers Series wp765, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  3. Richard E. Baldwin, 2006. "The euro's trade effect," Working Paper Series 594, European Central Bank. [Downloadable!]
  4. Robert Inklaar & Richard Jong-A-Pin & Jakob de Haan, 2005. "Trade and Business Cycle Synchronization in OECD Countries - a Re-examination," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? You can create your own reading lists on IDEAS.

This page was last updated on 2009-11-3.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.