Integration, Specialization, and Symmetry of MENA Countries

Abstract

: This article constitutes an enrichment of Frenkel and Rose (1998) approach. We seek to develop a coherent framework for this type of empirical study by considering a broader range of international symmetry transmission channels. Our attempt is to get a better characterization of the forces underlying the synchronization of the Middle Eastern and North African economies. The following transmission mechanisms are considered: Economic integration (inter- and intra-industry trade); Productive structure similarity; and economic policies coordination. Panel estimations with introduction of instrumental variables and the use of Generalized Method of Moments have been applied. We try to compare the dynamics of three integration types, the North–North (G7 vs G7), North–South (G7 vs MENA), and the South–South (MENA vs MENA). The purpose is to see how the impact of trade integration on the international co-movement differs from one type of integration to another. In every case, we try to evaluate the role that can be played by each of the various channels, and compare the results with the observed facts for the developed countries as well as with theory predictions. We find that the intra-industry trade and the productive structure similarity lead to more business cycle convergence. More trade integration, and precisely, the inter-industry one, does not necessarily lead to more business cycles synchronization.