BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
The Endogeneity of optimum currency area criteria, intraindustry trade and EMU enlargement
Abstract: This paper tests an endogeneity hypothesis of optimum
currency area (OCA) criteria (Frankel and Rose, 1998) on a cross-section of
OECD countries between 1990 and 1999. The findings indicate that
convergence of business cycles relates to intra-industry trade, but has no
direct relation between business cycles and bilateral trade intensity. As
far as intra-industry trade is positively correlated with trade
intensities, this result confirms the OCA endogeneity hypothesis. The
endogeneity of OCA linkage criteria implies extensive business cycle
harmonization between CEECs and EU countries in the medium term.
Keywords: optimum currency area; EMU; trade; business cycle; CEECs; (follow links to similar papers)
JEL-Codes: F15; F41; (follow links to similar papers)
33 pages, August 22, 2001
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