The Impact of Trade Integration on Business Cycle Synchronization for Mercosur Countries
This paper intends to evaluate empirically the impact of reduced trade barriers and increased trade on the synchronization of business cycles. It draws on Frankel and Rose (1998) who reassessed the Mundellian criteria on Optimum Currency Areas (OCAs) and considered their application to be untenable given that trade integration and cycle synchronization may be endogenous. This research aims to test this hypothesis for Mercosur countries. Using a quarterly panel dataset spanning the members since the establishment of the free trade area (FTA) in 1991 until 2008, the empirical findings indicate a positive effect, implying intra-industry trade
Volume (Year): 9 (2012)
Issue (Month): 1 (April)
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- Andrew Abbott & Joshy Easaw & Tao Xing, 2008. "Trade Integration and Business Cycle Convergence: Is the Relation Robust across Time and Space?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 403-417, 06.
- George S. Tavlas, 2009. "Optimum-Currency-Area Paradoxes," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 536-551, 08.
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