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Pattern of trade and European economic integration : an unexpected relation

  • Fabien Rondeau

    (CREM - CNRS)

In this article, the degree of integration between European countries is linked to the evolution of the pattern of trade. Evolution of the long-run sensitivity between European outputs is estimated by recursive Fully-Modifed Ordinary Least Squares (FM-OLS) and compared to a recursive index of intra-industry trade. Significant correlations are found between integration and intra-industry trade share. Interestingly, correlations have not all the same sign: positive for one group of countries and negative for others. The explanatory variable seems to be the initial intra-industry trade share. In the last section, a Hansen test is computed and confirms a threshold effect of the pattern of trade on economic integration. Finally, the development of the intra-industry trade due to the creation of the European Monetary Union has a positive e¤ect on integration for some countries but also a negative e¤ect on integration for other European countries.

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Paper provided by Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS in its series Economics Working Paper Archive (University of Rennes 1 & University of Caen) with number 200614.

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Date of creation: 2006
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Handle: RePEc:tut:cremwp:200614
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  1. Coe, David T & Helpman, Elhanan, 1993. "International R&D Spillovers," CEPR Discussion Papers 840, C.E.P.R. Discussion Papers.
  2. Fabien Rondeau & Christophe Tavéra, 2005. "Interdépendance macro-économique des pays européens et propagation des chocs conjoncturels d'activité," Économie et Prévision, Programme National Persée, vol. 169(3), pages 25-39.
  3. Bruno Van Pottelsberghe & Frank Lichtenberg, 1998. "International R&D spillovers comment," ULB Institutional Repository 2013/6233, ULB -- Universite Libre de Bruxelles.
  4. Finger, J M, 1975. "Trade Overlap and Intra-Industry Trade," Economic Inquiry, Western Economic Association International, vol. 13(4), pages 581-89, December.
  5. Hurlin, C. & MB.P. N'Diaye, P., 1998. "La methode d'estimation des moindres carres modifies ou fully modified," Papiers d'Economie Mathématique et Applications 98.26, Université Panthéon-Sorbonne (Paris 1).
  6. Hao, K. & Inder, B., 1994. "A Diagnostic Test for Structural Change in Cointegrated Regression Models," Monash Econometrics and Business Statistics Working Papers 19/94, Monash University, Department of Econometrics and Business Statistics.
  7. Allan w. Gregory & Bruce E. Hansen, 1992. "residual-Based Tests for Cointegration in Models with Regime Shifts," Working Papers 862, Queen's University, Department of Economics.
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