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Title:Do regional trade and specialization drive intra-regional risk-sharing? PDF Logo
Authors:Pfeffer, Barbara
Issue Date:2008
Series/Report no.:Joint discussion paper series in economics 2008,13
Abstract:The goal of the present paper is two-fold. First, I explore the impact of different trade patterns on industrial specialisation and consequently on business cycle co-movements between and within different regions. Especially, I emphasize industrial specialisation as a result of intra- or inter-industry trade. Furthermore, I justify the predictions of different theoretical trade models on the basis of my results . Second, I analyse the degree of risk-sharing between and within the regions in dependence of the previous step. In particular, the purpose is to clarify direct and indirect channels between trade, specialisation, business cycle co-movements and risk sharing. The expectations are that countries within a region with homogeneous specialisations show intra-industry trade. Hence regional business-cycles converge. Consequently, risk-sharing within these regions is not possible. These countries tend to be more internationally .nancially integrated than regionally. Inter-industry trade arises in countries within regions with heterogeneous specialisation. As a result regional business-cycles diverge. Now, countries can share risk within the region. Regional financial integration is stronger for these countries than international financial integration. One further question is: do the same patterns create risk sharing also in the means of consumption co-movements between or within a region?
Subjects:Trade
Specialization
Risk Sharing
JEL:F15
F36
Document Type:Working Paper
Appears in Collections:MAGKS Joint Discussion Paper Series in Economics, Universität Marburg

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