EconPapers    
Economics at your fingertips  
 

Trade Integration and Business Cycle Synchronization in the EMU: The Negative Effect of New Trade Flows

Jean-Sébastien Pentecôte (), Jean-Christophe Poutineau () and Fabien Rondeau

Open Economies Review, 2015, vol. 26, issue 1, 61-79

Abstract: This paper questions the impact of trade integration on business cycle sychronization in the EMU by distinguishing increase of existing trade flows (the intensive margin) and creation of new trade flows (the extensive margin). Using a DSGE model, we find that synchronization is weakened when new firms are allowed to export as a response to productivity gains. Consistenly with our model and using disaggregated data over 1995–2007 for the 11 founding members of the EMU, we find that trade intensity has a positive direct effect while new trade flows have a negative effect on business cycle synchronization. Furthermore, new flows play essentially an indirect role by intensifying specialization and explain 60 % of the overall effect of trade intensity and specialization on synchronization. Copyright Springer Science+Business Media New York 2015

Keywords: Trade integration; Business cycles; European Monetary Union (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1007/s11079-014-9318-8 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Trade Integration and Business Cycle Synchronization in the EMU: The Negative Effect of New Trade Flows (2015) Downloads
Working Paper: Trade Integration and Business Cycle Synchronization in the EMU: the Negative Effect of New Trade Flows (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:openec:v:26:y:2015:i:1:p:61-79

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2018-04-26
Handle: RePEc:kap:openec:v:26:y:2015:i:1:p:61-79