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Some Business Cycles Consequences of Signing Trade Agreements: The Case of NAFTA

  • Bejan, Maria

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://mpra.ub.uni-muenchen.de/2807/1/MPRA_paper_2807.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2807.

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Date of creation: Aug 2006
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Handle: RePEc:pra:mprapa:2807
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  1. Patrick J. Kehoe & Fabrizio Perri, 2000. "International business cycles with endogenous incomplete markets," Staff Report 265, Federal Reserve Bank of Minneapolis.
  2. Jonathan Heathcote & Fabrizio Perri, 2003. "Why Has the U.S. Economy Become Less Correlated with the Rest of the World?," American Economic Review, American Economic Association, vol. 93(2), pages 63-69, May.
  3. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
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