Business Cycle Synchronization and Regional Integration

Abstract

Deeper trade integration between Central America and the United States, as envisaged under the Central American Free Trade Agreement, is likely to lead to closer links between Central American and U.S. business cycles. This article assesses the degree of business cycle synchronization between Central America and the United States—relevant not only for a better understanding of the influence of important trading partners on the business cycle fluctuations in the domestic economy but for evaluating the costs and benefits of macroeconomic coordination.