Trade, Finance, Specialization, and Synchronization

IMF Working Papers, April 1, 2003

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Trade, Finance, Specialization, and Synchronization

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Bibliographic details

• Authors: Jean Imbs
• Published: April 1, 2003
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451850383.001

Methodology

• Uses both international and intranational data.
• Employs a system of simultaneous equations to evaluate linkages between:
  • trade in goods,
  • trade in financial assets,
  • specialization, and
  • business cycle synchronization.

Key findings

• Simultaneity:
  • Simultaneity is important, as both trade and financial openness have a direct and an indirect effect on cycle synchronization.
• Financial integration:
  • A variety of alternative measures of financial integration suggest that regions with strong financial links are significantly more synchronized, though they are also more specialized.
• Specialization:
  • Specialization patterns have a sizable effect on business cycles, beyond their reflection of intra-industry trade, and of openness to goods and assets trade.
• Trade role:
  • The estimated role of trade is in line with existing models once intra-industry trade is controlled for.
• Theoretical and empirical link:
  • Results relate to a recent strand of international business cycle models with incomplete markets and transport costs.
  • Empirically, results point to an important omission in the usual criteria defining an optimal currency area, namely specialization patterns.

Subjects and keywords (as listed)

• Subjects: Balance of payments, Business cycles, Capital account, Capital flows, Economic growth, Financial integration, Financial markets, International trade, Plurilateral trade
• Keywords: Africa, Business cycles, business cycles correlation, business cycles synchronization, Capital account, Capital flows, correlation coefficient, cross-state trade flow, economic structure, Financial integration, financial openness, industry trade, international business cycle, least squares, optimal currency area, Plurilateral trade, specialization, Trade, WP

Content in this bundle

• Trade, Finance, Specialization, and Synchronization - WP/03/81
  • Trade, Finance, Specialization, and Synchronization - WP/03/81 (Markdown version)
  • Trade, Finance, Specialization, and Synchronization - WP/03/81 (PDF)