Some Business Cycle Consequences of Trade Agreements:The Case of the North American Free Trade Agreement

Maria Bejan

No 2007/03, RSCAS Working Papers from European University Institute

Abstract: This paper investigates the effects of signing a trade agreement on the correlations of the business cycle fluctuations of consumption, investment and output between two countries. We construct an international business cycle model with trade costs and we calibrate it to the United States and Mexico in order to estimate the impact of NAFTA on their co-movements. Although there exist some discrepancies between the theory and data in the degree of correlation, the direction of change corresponds to the one in the data.

Keywords: International Business Cycles; Trade Agreements; International Co-movements (search for similar items in EconPapers)
Date: 2007-02-09
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Citations: View citations in EconPapers (2)

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