Do regional Trade and Specialization drive intra-regional Risk-Sharing?
Loading...
Date
relationships.isAuthorOf
Journal Title
Journal ISSN
Volume Title
Publisher
Philipps-Universität Marburg
Abstract
The goal of the present paper is two-fold. First, I explore the impact
of di¤erent trade patterns on industrial specialisation and consequently
on business cycle co-movements between and within di¤erent regions. Es-
pecially, I emphasize industrial specialisation as a result of intra- or inter-
industry trade. Furthermore, I justify the predictions of di¤erent theo-
retical 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 indi-
rect 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 …nancial integra-
tion is stronger for these countries than international …nancial 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?
Keywords
Trade, Risk Sharing, Specialization