Price‐level co‐movements within currency unions: An alternative integration metric

Abstract

This paper analyses currency union integration by testing whether price levels in member countries possess a common stochastic trend. The trace statistic test for cointegration proposed by (Johansen, 1995) demonstrates the presence of such a trend for most unions. A disaggregated analysis identifies a common stochastic trend for several though fewer than half of country pairs within a union. Some unions such as the Eurozone have small shares of cointegrated country pairs. Yet, the share of cointegrated country pairs is large relative to countries outside currency unions. Comparison to a control group (country pairs where one country belongs to a given union and the other country does not) indicates that the cointegration found within a currency union is a union‐specific trait and not a feature of the individual countries within the union. These results provide an alternative metric to intraunion trade for gauging the extent of currency union integration.

Do political relations affect international trade? Evidence from China’s twelve trading partners

“…To avoid estimates potentially biased by dynamic behavior in the data, we adopt the following approach based on Berkowitz, DeJong, and Husted ( 1998 ) and Whitten ( 2018 ) in order to discover a meaningful relationship between international political relations and trade. First, we use Stata’s varsoc command in order to find an appropriate number of lags (as determined by the number of lags that minimizes the Schwarz Bayes Information Criterion or SBIC) for a VAR model in question.…”