Free trade agreements and the transmission of shocks across countries

ANALES de la ASOCIACION ARGENTINA DE ECONOMIA POLITICA

Asociación Argentina de Economía Política

Lugar: Buenos Aires; Año: 2008 p. 1 - 1

1852-0022

font size="3" face="Arial"> Our main goal is to evaluate the impact of free trade agreements on business cycle synchronization for a sample of 91 countries over the period 1960-2004. Our analysis involves an estimation procedure based on the features of panel data models and features of simultaneous equations models. This methodology allows us to decompose the total effect of FTA and Trade on output co-movement into their different components. Besides, we account for the possibility that the FTA itself may be endogenous and instrument for it. Our findings suggest that FTA may have two indirect channels of affecting Business Cycle Synchronization: through higher trade and inducing more symmetries in structures of production.