The Endogenity of the Optimum Currency Area Criteria, Trade, and Labour Market Rigidities: Implications for EMU Enlargement

Jarko Fidrmuc

No 16, EUI-RSCAS Working Papers from European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS)

Abstract: This paper analyzes two channels of business cycle convergence, which are subsequently applied to the EU acceding countries. First, trade intensity and intra-industry trade is found to induce a convergence of business cycles. This finding confirms the OCA endogeneity hypothesis. Second, labor market rigidities implying differences in transmission mechanisms lower the correlation of business cycles between the countries. Both effects are significant in a cross-section of OECD countries. Furthermore, the net effect implies a comparable degree of business cycle harmonization of Central and Eastern European countries with the EU as for the current members in the medium run.

Keywords: international trade; EMU; unemployment; enlargement (search for similar items in EconPapers)
Date: 2004-10-15
New Economics Papers: this item is included in nep-eec, nep-ifn, nep-mon and nep-tra
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Citations: View citations in EconPapers (3)

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