Trade Integration and Business Cycle Synchronization in the Euro Area: The Case of Southern European Countries

Gouveia, Sofia; Correia, Leonida

doi:2013.28.1.85

The Journal of Economic Integration 2013 March;28(1) :85-107.
DOI: https://doi.org/10.11130/jei.2013.28.1.85

Trade Integration and Business Cycle Synchronization in the Euro Area: The Case of Southern European Countries

Sofia Gouveia, Leonida Correia,

University of Trás-os-Montes and Alto Douro (UTAD), Vila Real, Portugal

Corresponding Author: Sofia Gouveia ,Tel: +351 259350725, Email: sgouveia@utad.pt.

ABSTRACT

This paper examines synchronization in the euro area and the role of intra-EMU trade from 1981 to 2011, focusing in particular on southern European countries. The results indicate that the intensification of synchronisation that occurred in the nineties across almost all countries could partially be explained by the increase in trade, which has been strengthened since the start of the run-up to the EMU. For southern European economies, the results are mixed. We find also that trade imbalances have grown over time, becoming more evident in the common currency period. Furthermore, we document a positive and significant relationship between intra-EMU trade linkages and cyclical correlations.

JEL Classification

E32: Business Fluctuations; Cycles
F15: Economic Integration
F41: Open Economy Macroeconomics

Keywords: Business Cycle | Synchronisation | Trade | European Integration | Southern Europe

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