Some Business Cycle Consequences of Trade Agreements: Th e Case of the North American Free Trade Agreement

摘要

This paper investigates the effects of signing a trade agreement on the correlations of the businesscycle fluctuations of consumption, investment and output between two countries. We construct aninternational business cycle model with trade costs and we calibrate it to the United States and Mexicoin order to estimate the impact of NAFTA on their co-movements. Although there exist somediscrepancies between the theory and data in the degree of correlation, the direction of changecorresponds to the one in the data.