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CURRENCY UNION, FREE-TRADE AREAS, AND BUSINESS CYCLE SYNCHRONIZATION

Published online by Cambridge University Press:  14 February 2013

Pierangelo De Pace
Pierangelo De Pace*
Affiliation:
Pomona College
*
Address correspondence to: Pierangelo De Pace, Pomona College, Department of Economics; Carnegie Building, Room 205, 425 N College Avenue, Claremont, CA 91711, USA; e-mail: [email protected].
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Abstract

Since the 1970s, the characteristics of international business cycles have changed, and deeper economic integration has modified the features of cross-country comovement. We formally test for correlation shifts in measures of real economic activity and economic/financial integration. In Europe we find some statistically significant evidence of higher correlations for several subgroups of countries following the creation of the EMU in 1999. We detect significantly more pronounced correlations between Mexico and the United States and between Mexico and Canada in North America after the enforcement of the NAFTA in 1994. Results are derived from an econometric framework based on nonparametric iterated stationary bootstrap methods, whose statistical reliability and performance we assess through Monte Carlo simulations.

Keywords

Cycle SynchronizationHypothesis TestingBootstrap Methods
Type
Articles
Information
Macroeconomic Dynamics , Volume 17 , Issue 3 , April 2013 , pp. 646 - 680
Copyright
Copyright © Cambridge University Press 2013

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