## Trade, Finance, Specialization, and Synchronization

_IMF Working Papers, April 1, 2003_

## Source details

**Canonical URL:** [Trade, Finance, Specialization, and Synchronization](https://www.imf.org/en/publications/wp/issues/2016/12/30/trade-finance-specialization-and-synchronization-16431)

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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

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### 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

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## Content in this bundle

- **Trade, Finance, Specialization, and Synchronization - WP/03/81**
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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/trade-finance-specialization-and-synchronization-16431_