In this paper we explore three important areas where deeper trade and financial integration in East Asia can influence: (1) business cycle co-movements in the region, (2) the extent of risk sharing across countries and (3) price co-movements across countries. We find evidence that trade integration enhances co-movements of output but not of consumption across countries. Especially the fact that trade integration does not raise co-movements of consumption as much as that of output is interpreted as trade integration does not improve the extent of risk sharing. Co-movements of price arise most significantly as trade integration deepens, lowering the border effects and allowing better opportunities for resource reallocation across countries. In contrast, financial integration demonstrates much weaker evidence of enhancing co-movements across countries. Deeper financial integration improves price co-movements weakly but does not enhance output or consumption co-movements at all. However, since the current level of financial integration in East Asia is quite low, our evidence is too early to firmly determine the role of financial integration. Copyright 2006 The Authors Journal compilation Blackwell Publishing Ltd. 2006 .

What is the relationship between trade and economic growth? Does trade positively affect economic growth? Owing to the ambiguity of this relationship, the empirical relationship has remained open ( Rodriguez and Rodrik, 2001 ; Baldwin, 2003 ). This paper introduces "trade structure" variables, borrowed from the paper of Lederman and Maloney (2003 ), and applies them to the relationship. A dynamic panel estimation for the data of 66 countries during 1991-2004 is used to verify the validity and robustness of the relationship. Trade structure variables show strong evidence of positive effects on growth. Free-trade agreements/areas (FTAs) also enhance economic growth. East Asia shows a different relationship between trade and growth than the world and reflects a weaker role of FTAs in its growth. Copyright (C) 2010 Blackwell Publishing Ltd.

The purpose of this paper is to analyse whether FTAs cause the income levels of member economies to converge or diverge. Although existing studies predict the possibility of convergence among FTA members to a certain degree, they fail to provide definitive evidence. By using the concept of accelerating convergence, this study aims to estimate the pure convergence effects of FTAs, separate from the conventional notion of income convergence, so-called &bgr;-convergence. The neoclassical model of economic growth has been extended to incorporate varying steady states for an open-economy framework. Applying the system GMM method to a dynamic panel of data consisting of major FTAs - comprising the European Union, NAFTA, Mercosur and AFTA, and encompassing the cases of launching an FTA, expanding membership or deepening FTA integration - we find considerable evidence for the income convergence effect of FTAs. Copyright 2006 The Authors Journal compilation Blackwell Publishing Ltd. 2006 .

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