The Effects of Trade and Financial Integrations on Business Cycle Synchronization in ECO: Evidence from a Dynamic Correlation Index

The new theories on international economic indicate that the shocks from trade and financial integrations have different effects on business cycle synchronization. This paper investigates these effects on business cycle synchronization in ECO Countries، during 1993-2011 by introducing a new and dynamic cross correlation index. The results show that an increase of trade and financial transactions causes to strengthen business cycle synchronization in ECO Countries. Also، more industrial similarity between a pair of countries induces the higher bilateral synchronization.