Belhadj, Aam and Eggoh, Jude (2010): Co-movements Of Business Cycles In The Maghreb: Does Trade Matter?
Download (855Kb) | Preview
Over the past two decades, the Maghreb Countries have initiated a liberalization process characterized by increasing trade flows and they have strengthened economic and financial linkages between their economies. In this paper, we demonstrate how co-movements of outputs would respond to this integration process. The nature of this relationship seems to be important for these countries because the decision to join an economic and monetary union would depend on how the union affects trade and co-movements. To this end, we estimate a panel model describing the effect of trade intensity on business cycles correlation over the period 1980-2005. Thereafter, to check the robustness of the results, we add many control variables commonly described in the literature. We use three estimation techniques: pooled OLS, fixed vs. random effects as well as 2SLS estimations. Our main results suggest that while trade intensity may help to harmonize business cycles in Maghreb countries, the magnitude of this harmonization is lower than for industrial countries. Moreover, intra-industry trade causes a reverse –counterintuitive- effect. Many lessons are thereby learned.
|Item Type:||MPRA Paper|
|Original Title:||Co-movements Of Business Cycles In The Maghreb: Does Trade Matter?|
|Keywords:||Business Cycles, Trade Intensity, Intra-Industry Trade, Maghreb|
|Subjects:||F - International Economics > F1 - Trade > F15 - Economic Integration
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies
|Depositing User:||Aram Belhadj|
|Date Deposited:||07. Jan 2012 19:23|
|Last Modified:||14. Feb 2013 17:29|
Baldwin R (2005): “The Euro’s trade effects”, Graduate Institute of International studies, Geneva. Presented at the June 2005 ECB conference “What effect is EMU having on the euro area and its member countries?”.
Bangaké C, Belhadj A & Jedlane N (2007) : « Toward Maghreb Monetary Unification: what does the theory and history tell us?” African Review of Money Finance and Banking, supplementary issue of Savings and Development, p7-37.
Bchir M.H, Ben Hammouda H, Oulmane N & Sadni Jallab M (2006): “The Cost of non-Maghreb: Achieving the Gains from Economic Integration” ATPC Work in progress No. 44
Beine M (1998): “L’union économique et monétaire Européenne à la lumière de la théorie des zones monétaires optimales : une revue de la littérature », mimeo, université Lille II.
Boone L & Maurel M (1999): « An Optimal Currency Area Perspective of the EU Enlargement to the CEECs”CEPR discussion paper 2119
Calderón C, Chong A & Stein E (2007):“Trade Intensity and Business Cycle Synchronization: Are Developing Countries any Different? Journal of International Economics, 71 (1) p2-21.
Carrère C (2004) : « African regional agreements: impact on trade with or without currency unions” Journal of African Economies, Vol 13(2) p199-239.
Darrat A-F. & A. Pennathur, (2002): “Are the Arab Maghreb Countries Really Integrable? Some Evidence from the Theory of Cointegrated Systems”Review of Financial Economics n° 11.
De Grauwe P & Mongelli F.P (2005): « Endogeneities of optimum currency areas: what brings countries sharing a single currency closer together? » ECB Working Paper Series n°468, April.
Eric C.Y.Ng (2010): “Production fragmentation and business-cycle comovement” Journal of International Economics, vol 82, p1-14.
Fidrmuc J (2004): “The endogeneity of optimum currency area criteria, intra-industry trade and EMU enlargement”, Contemporary Economic Policy, Vol 22, N°1, p1-12.
Finaish M. & E. Bell, 1994, “The Arab Maghreb Union”, IMF Working Papers, N° 94/55
Frankel J & Rose A (1996): “Economic structure and the decision to adopt a common currency” institute for international economics studies, Stockholm university seminar paper n°611, Stockholm.
Frankel J. & Rose A, (1998): “The Endogeneity of the Optimum Currency Area Criteria”, The Economic Journal 108, July.
Fontagné L., Freudenberg M. (1999), “Marché unique et développement des échanges” Economie et Statistique, (326-327): 71-95.
Fontagné L, Freudenberg M & Gaulier G (2006): "A Systematic Decomposition of World Trade into Horizontal and Vertical IIT," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(3), pages 459-475, October.
Glick, R & Rose, A (2002): « Does a currency Union affect trade? The time series Evidence» European Economic Review, 46, 6 (June) 1125-51
Hallet H.A. & Piscitelli, (2001): “The Endogenous Optimal Currency Areas Hypothesis: Will a Single Currency Induce Convergence in Europe?”, Paper presented at the Royal Economic Society Annual Conference, University of Durham 9-11 April.
Imbs J (2004): “Trade, Finance, Specialization, and Synchronization” the review of economics and statistics, Vol 86 n°3 723-734.
Imbs J (1999): “Co-fluctuations” CEPR Discussion Paper n°2267, London.
Kalemli-OzcanS, Bent S & Oved Y (2001): « Economic Integration, Industrial Specialisation and the asymmetry of Macroeconomic Fluctuations » Journal of International Economics, 55, 107-137
Kenen P. (1969): “The theory of optimum currency areas: an eclectic view”, in Mundell R.A & Swoboda A.K, Monetary Problems of the International Economy, The University of Chicago.
Kose, M-A & Yi K-M (2001):“International Trade and Business Cycles: Is Vertical Specialization the Missing Link?” American Economic Review 91(2): 371-375
Krugman P (1991): “Geography and Trade”. The MIT Press, Cambridge, MA.
Krugman P (1993):« Lessons of Massachusetts for the EMU » in Torres F, Giavazzi F. eds, Adjustment and Growth in the European Monetary Union, Cambridge University Press, 241-260.
Mac-kinnon R (1963): “Optimum Currency Areas”, American Economic Review, Vol. 53.
Masson P (2008): « Currency Unions in Africa: Is the Trade Effect Substantial Enough to Justify their Formation?” The World Economy
Masson P. & C. Pattillo (2004) :“Une Monnaie Unique pour l’Afrique?”, Finance & Développement, Décembre.
Mongelli F.P (2002): « New views on the optimum currency area theory: What is EMU telling us ? » ECB Working Papers Series n°138, April.
Mundell R.A (1961): “A Theory of Optimum Currency Areas”, American Economic Review.
Nitsch V (2002): “Comparing Apples and Oranges: the effect of multilateral currency unions on the trade is small”, mimeo, Berlin: Bankgesellschaft Berlin.
Peridy N (2005): « The trade effects of the Euro–Mediterranean partnership: what are the lessons for ASEAN countries? Journal of Asian Economics 16 125–139
Rose A (2000): « One Money, One Market: Estimating the effect of common currencies on trade » Economy Policy, vol 17, pp7-46
Rose A (2004): “A Meta-Analysis of the Effects of Common Currencies on International Trade,” NBER Working Paper no. 10373.
Stockman, A (1988) Sectoral and Aggregate National Disturbances to Industrial Output in Seven European Countries, Journal of Monetary Economics 21, 387-409.
Tahari A, Brenner P, De Vrijer E, Moretti M, Senhadji A, Sensenbrenner G and Solé J (2007) : « Financial Sector Reforms and Prospects for Financial Integration in Maghreb Countries” IMF Woking Papers 07/125.
Tavlas G (1993): “The New Theory of Optimum Currency Areas”, World Economy, N° 33
World Bank (2006): “Is there a new vision for Maghreb economic integration?” Social and Economic Development Group, MENA region, November.
Zsolt Darvas & György Szapáry (2008): "Business Cycle Synchronization in the Enlarged EU" Open Economies Review, Springer, vol. 19(1), 1-19, February.