Business Cycles in the Maghreb<br/> : Does Trade Matter?

Eggoh, Jude; Belhadj, Aram

doi:2015.30.3.553

The Journal of Economic Integration 2015 September;30(3) :553-576.
DOI: https://doi.org/10.11130/jei.2015.30.3.553

Business Cycles in the Maghreb
: Does Trade Matter?

Jude Eggoh, Aram Belhadj,

Université d’Angers, Angers, France & Université d’Abomey-Calavi, Bénin
Université de Carthage, Nabeul, Tunisie

Corresponding Author: Jude Eggoh ,Tel: +33 648521048, Email: jude.eggoh@univ-angers.fr

ABSTRACT

In this paper, we test the Frankel & Rose hypothesis of Optimum Currency Area for the Maghreb countries by demonstrating how the co-movements of outputs would respond to a trade integration process. In particular, by using panel analysis over the period 1980~2010, we evaluate if a monetary integration project across these countries is endogenous. Our main result suggests that while trade intensity may help to harmonize business cycles, the magnitude of this harmonization is lower for the Maghreb countries than for industrial countries. This result is robust even when we take into consideration many control variables including intra-industry trade, economic diversification, and financial integration. Therefore, we suggest that an acceleration of trade linkage as well as product diversification should take place prior to any move towards monetary union across the Maghreb countries.

JEL Classification

E32: Business Fluctuations; Cycles
F15: Economic Integration
F41: Open Economy Macroeconomics
F43: Economic Growth of Open Economies

Keywords: Business Cycles | Trade Intensity | Intra-Industry Trade | Maghreb