Trade and Business-Cycle Comovement: Evidence from the EU

Luigi Bocola

Research output: Contribution to journalArticle

Abstract

This paper is an empirical study of the determinants of business-cycle comovement. Using a panel of European countries (1972-2004) it is found that bilateral trade intensity is a robust determinant of real comovement in Europe, this confirming the seminal study by Frankel and Rose (1998). It is also found that convergence in macroeconomic policies (especially fiscal policies) is associated to high degree of intra-european business-cycle correlation. Moreover, having controlled for policy convergence, the effect of bilateral trade on business cycle comovement weakens on average by a factor of 36%-33% with respect to that estimated according to Frankel and Rose’s econometric specification, this suggesting the potential endogeneity of the set of instrumental variables adopted by the two authors (Gruben, Koo and Millis, 2002).
Original languageEnglish (US)
Pages (from-to)25-62
Number of pages38
JournalRivista di Politica Economica
Volume96
Issue number6
StatePublished - 2006

Fingerprint Dive into the research topics of 'Trade and Business-Cycle Comovement: Evidence from the EU'. Together they form a unique fingerprint.

Cite this