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Bilateral Trade and Business Cycles Synchronization: African Monetary Integration Perspective

  • Tapsoba Jules-Armand

    ()

    (CERDI)

The European Commission (1990) and Frankel and Rose (1997, 1998) pointed out that the traditional paradigm of Optimum Currency Areas is misleading because some consequences of monetary unions bring country-specific shocks closer together. Trade, for example, is not only a result of monetary union but it also increases business cycles synchronization. We test for the 53 African countries over the 1975-2004 period the hypothesis suggesting that monetary integration adds force to bilateral trade intensity which in turn, improves conditions for the practice of common monetary policy throughout business cycles synchronization. Our results support such argument and suggest some policy recommendations for African monetary integration.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 6 (2007)
Issue (Month): 25 ()
Pages: 1-15

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Handle: RePEc:ebl:ecbull:eb-07f40003
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  1. Zsolt Darvas & Andrew K. Rose & György Szapáry, 2005. "Fiscal Divergence and Business Cycle Synchronization: Irresponsibility is Idiosyncratic," MNB Working Papers 2005/03, Magyar Nemzeti Bank (the central bank of Hungary).
  2. Jean Imbs, 2004. "Trade, Finance, Specialization, and Synchronization," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 723-734, August.
  3. John Shea, 1996. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," NBER Technical Working Papers 0193, National Bureau of Economic Research, Inc.
  4. Marianne Baxter & Michael A. Kouparitsas, 2004. "Determinants of Business Cycle Comovement: A Robust Analysis," NBER Working Papers 10725, National Bureau of Economic Research, Inc.
  5. Ian Babetskii, 2005. "Trade integration and synchronization of shocks," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 105-138, 01.
  6. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
  7. Rand, John & Tarp, Finn, 2001. "Business Cycles in Developing Countries: Are They Different?," MPRA Paper 62445, University Library of Munich, Germany.
  8. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Is EMU more justifiable ex post than ex ante?," European Economic Review, Elsevier, vol. 41(3-5), pages 753-760, April.
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