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Please use this identifier to cite or link to this item: http://hdl.handle.net/10400.5/864

Title: The shrinking endogeneity of optimum currency areas criteria: evidence from the European Monetary Union - A Beta Regression Approach
Authors: Silvestre, João
Mendonça, António
Passos, José
Keywords: European and Monetary Union (EMU)
Business Cycles Correlation
Optimum Currency Areas
International Trade
Beta Regression
Issue Date: 2007
Publisher: ISEG - DE
Citation: Silvestre, João, António Mendonça e José Passos . 2007. "The shrinking endogeneity of optimum currency areas criteria: evidence from the European Monetary Union - A Beta Regression Approach". Instituto Superior de Economia e Gestão - DE Working papers 22-2007
Series/Report no.: Working papers;22/2007/DE
Abstract: The endogeneity of optimum currency areas criteria has been widely studied since Frankel and Rose (1998) seminal paper. Literature normally suggests that there is a positive relationship between trade and business cycles correlation. This paper develops work on this subject (Silvestre and Mendonça, 2007) where we confirm this hypothesis in euro area countries and UE-15 for 1967-2003 period using OLS and 2SLS estimates. However, we also find then that trade influence on cycles synchronization diminished in the last years. Now our goal was precisely to evaluate this question. Using a non-linear model based on Beta distribution in the same sample, we concluded that trade has a decreasing marginal effect on business cycles correlation. This result shows that trade flows are important in the first stages of economic integration, but become less important as trade intensity increases. Other factors must then be considered.
URI: http://hdl.handle.net/10400.5/864
ISSN: 0874-4548
Appears in Collections:DE - Documentos de trabalho / Working Papers

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