We show empirically that regions with a more specialized production structure exhibit output fluctuations that are less correlated with those of other regions (less ‘symmetric’ fluctuations). Combined with the causal relation running from capital market integration to regional specialization found in an earlier study, this finding supports the idea that higher capital market integration leads to less symmetric fluctuations. This mechanism counterbalances the effect of lower trade-barriers on the symmetry of fluctuations quantified by Frankel and Rose (1998).
Economic Integration, Industrial Specialization, and the Asymmetry of Macroeconomic FluctuationsSebnem Kalemli-Ozcan, Bent Sorensen, and Oved Yosha ,
1( 55 )
Journal of International Economics