Economic integration in North America

Formal analysis of economic synchronization in North America is scarce. In this document we conduct an econometric exercise to determine the existence of common movements at short-run and long-run horizons among the gross domestic products of Canada, Mexico and the United States. Cointegration and c...

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Bibliographic Details
Published in:Applied econometrics and international development 2008-07, Vol.8 (2), p.111-122
Main Authors: Castillo-Ponce, R A, Ramirez-Acosta, R J
Format: Article
Language:English
Subjects:
Canada
Economic integration
Economic theory
GATT
Gross domestic product
Interdependence
Mexico
NAFTA
North America
Regional economics
Regional integration
U.S.A
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Summary:Formal analysis of economic synchronization in North America is scarce. In this document we conduct an econometric exercise to determine the existence of common movements at short-run and long-run horizons among the gross domestic products of Canada, Mexico and the United States. Cointegration and common features tests suggest a significant degree of economic interdependence. In particular, for the sample period 1980-2006 we identify the existence of a common trend and two common cycles. Interestingly, we find that the North American economies have been highly synchronized since the 1980's; a common trend and a common cycle are identified for the sub-sample period 1980-1993. We conclude that the signing of the North American Free Trade Agreement (NAFTA) was not the trigger that prompted economic integration, but primarily an event that contributed to strengthen a process that had already begun. Reprinted by permission of EAAEDS: http://www.usc.es/economet.eaa.htm
ISSN:1578-4487