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

Maria Bejan

Review of Economic Dynamics, 2011, vol. 14, issue 4, 667-685

Abstract: 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)

Keywords: NAFTA; International business cycles; Comovements (search for similar items in EconPapers)
JEL-codes: E32 E37 F02 F15 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (11)

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DOI: 10.1016/j.red.2011.06.003

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