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Trade Agreements and International Comovements: the Case of NAFTA (North American Free Trade Agreement)

  • Maria Bejan

    (Rice University)

Business cycles correlation between Mexico and the US changed from being on a downward sloping path before 1992 to an upward sloping path after that. This paper suggests that the North American Free Trade Agreement could be the explanation. NAFTA generated not only an increase in the volume of trade but also a change in the elasticity of substitution between imports and exports. The paper tests this hypothesis using the neoclassical business cycles model. Although there are still some discrepancies between the theory and data in the degree of correlation, the direction of change in the model corresponds to the one in the data. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2011.06.003
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 14 (2011)
Issue (Month): 4 (October)
Pages: 667-685

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Handle: RePEc:red:issued:07-86
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  1. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
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  11. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
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  22. repec:idb:brikps:6501 is not listed on IDEAS
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