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

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Author Info
Maria Bejan

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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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Publisher 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;

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