Extrait
From Various Degrees of Trade to Various Degrees of Financial Integration: What Do Interest Rates Have to Say?
1 Introduction
The second half of the 20th century has been characterised by the rise of regional trade agreements (RTAs) along with the worldwide trend of removing trade barriers within the General Agreement on Trade and Tariffs (G ATT) negotiations. The trade creating (within the considered trade un ions) and trade diverting (with the rest of the world) effects associated with regional trade agreements, have been extensively studied in the literature, relying on the well-known gravity equation (see, among others, Frankel, 1997; Soloag a and Winters, 2001 ; Carrère, 2006). All these papers largely support the existence of enhancing effects of RTAs on intra-union trade, although Carrère (2006) 's results report the existence of strong diverting effects with the rest of the world.Alongside with this literature, another strand of research emphasises that trade integration goes along with financial integration. As stressed by Eichengreen and Park (2005), it seems indeed that "finance follows trade" (p. 99). More specifically, they conclude that Asia seems less financially integrated than Europe because it has done less to promote the growth of intra-regional trade. Focusing on the case of the European Monetary Union, Frankel and Rose (1997, 1998) show that countries with closer trade links tend to have more tightly correlated business cycles. In the case of EMU members, the implied economic integration went along with a strong process of financial integration. More recently, a new line of papers investigates the complementarity between bilateral trade in goods and bilateral financial claims. Both theoretical arguments (see Obstfeld and Rogoff, 2000; Serrat, 2001; Rose and...Voir le contenu complet de ce document
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