Convergence Of Shocks And Trade In The Enlarged European Union
AbstractThis paper explores the relation between trade flows and cross-country symmetry of supply and demand shocks using data from the EU27 countries. Increased bilateral trade intensity is found to have a positive impact on the correlation of both demand and supply shocks. Intra-industry trade is found to be positively linked to correlations of supply-side shocks but negatively linked to correlation of demand shocks. Our results thus provide support for the argument that aggregate demand spill-overs and intra-industry trade, rather than specialization, dominate in the process through which trade flows affect the cross-country transmission of shocks in Europe. At the same time, our estimates suggest that monetary-policy convergence in Europe (the circulation of the euro), while having increased symmetry of supply-side shocks, has had no direct favourable impact on symmetry of demand shocks. By contrast, the process of fiscal-policy convergence is found to have resulted in more correlated demand shocks across the EU member states. Classification-JEL: F4, F15, E32
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 15-08.
Date of creation: Jan 2008
Date of revision: Jan 2008
convergence of shocks; trade flows; European integration; cyclical macroeconomic fluctuations;
Find related papers by JEL classification:
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- F15 - International Economics - - Trade - - - Economic Integration
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-30 (All new papers)
- NEP-CBA-2008-07-30 (Central Banking)
- NEP-EEC-2008-07-30 (European Economics)
- NEP-MAC-2008-07-30 (Macroeconomics)
- NEP-OPM-2008-07-30 (Open Economy Macroeconomics)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roberto Patuelli).
If references are entirely missing, you can add them using this form.