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Some Business Cycle Consequences of Trade Agreements:The Case of the North American Free Trade Agreement

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  • Maria Bejan

Abstract

This paper investigates the effects of signing a trade agreement on the correlations of the business cycle fluctuations of consumption, investment and output between two countries. We construct an international business cycle model with trade costs and we calibrate it to the United States and Mexico in order to estimate the impact of NAFTA on their co-movements. Although there exist some discrepancies between the theory and data in the degree of correlation, the direction of change corresponds to the one in the data.

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File URL: http://cadmus.eui.eu/dspace/bitstream/1814/6702/1/RSCAS_2007_03.pdf
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Bibliographic Info

Paper provided by European University Institute in its series RSCAS Working Papers with number 2007/03.

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Date of creation: 09 Feb 2007
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Handle: RePEc:rsc:rsceui:2007/03

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Related research

Keywords: International Business Cycles; Trade Agreements; International Co-movements;

References

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  1. Timothy J. Kehoe, 2003. "An evaluation of the performance of applied general equilibrium models of the impact of NAFTA," Staff Report 320, Federal Reserve Bank of Minneapolis.
  2. Ambler, S. & Cardia, E. & Zimmermann, C., 2000. "International Transmission of the Business Cycle in a Multi-Sector Model," Cahiers de recherche 2000-06, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. Heathcote, Jonathan & Perri, Fabrizio, 2002. "Financial autarky and international business cycles," Journal of Monetary Economics, Elsevier, vol. 49(3), pages 601-627, April.
  4. Anderson, H.M. & Kwark, N.-S. & Vahid, F., 1999. "Does International Trade Synchronize Business Cycles?," Monash Econometrics and Business Statistics Working Papers 8/99, Monash University, Department of Econometrics and Business Statistics.
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Cited by:
  1. Claudia S. Gómez-López & Luis A. Puch, 2008. "Uso de Energía en Economías Exportadoras de Petróleo," Economic Reports 24-08, FEDEA.

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