The Endogeneity of the Optimum Currency Area Criteria, Intraindustry Trade, and EMU Enlargement

Jarko Fidrmuc

LICOS Discussion Papers from LICOS - Centre for Institutions and Economic Performance, KU Leuven

Abstract: This paper tests the endogeneity hypothesis of OCA criteria (Frankel and Rose, 1998) in a cross-section of OECD countries between 1990 and 1999. It is shown that intraindustry trade actually causes the convergence of business cycles, while there is no direct relation between business cycles and bilateral trade intensity. As far as intraindustry trade is positively correlated with trade, the OCA endogeneity hypothesis is confirmed, although the argumentation follows Krugman (1993). Finally, the endogeneity of OCA criteria implies a comparable degree of business cycle harmonization of CEECs with EU countries as for the current members for the medium term.

Keywords: Optimum currency area; EMU; trade; business cycle; CEECs (search for similar items in EconPapers)
JEL-codes: F15 F41 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2001
New Economics Papers: this item is included in nep-ifn and nep-mfd
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Citations: View citations in EconPapers (52)

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http://www.econ.kuleuven.be/licos/publications/dp/dp106.pdf

Related works:
Journal Article: The Endogeneity of the Optimum Currency Area Criteria, Intra‐industry Trade, and EMU Enlargement (2004)
Working Paper: The endogeneity of optimum currency area criteria, intraindustry trade and EMU enlargement (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:lic:licosd:10601

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