The Endogeneity of the Optimum Currency Area Criteria, Intraindustry Trade, and EMU Enlargement
AbstractThis paper tests the endogeneity hypothesis of OCA criteria (Frankel and Rose, 1998) in a cross-section of OECD countries between 1990 and 1999. It is shown that intraindustry trade actually causes the convergence of business cycles, while there is no direct relation between business cycles and bilateral trade intensity. As far as intraindustry trade is positively correlated with trade, the OCA endogeneity hypothesis is confirmed, although the argumentation follows Krugman (1993). Finally, the endogeneity of OCA criteria implies a comparable degree of business cycle harmonization of CEECs with EU countries as for the current members for the medium term.
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Bibliographic InfoPaper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 10601.
Length: 22 pages
Date of creation: 2001
Date of revision:
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Optimum currency area; EMU; trade; business cycle; CEECs;
Other versions of this item:
- Jarko Fidrmuc, 2004. "The Endogeneity of the Optimum Currency Area Criteria, Intra-industry Trade, and EMU Enlargement," Contemporary Economic Policy, Western Economic Association International, vol. 22(1), pages 1-12, 01.
- F15 - International Economics - - Trade - - - Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-03 (All new papers)
- NEP-IFN-2003-11-03 (International Finance)
- NEP-MFD-2003-11-03 (Microfinance)
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