The Puzzle of Indian Urbanisation

This paper uses simultaneous equations error component three-stage least squares (EC3SLS) panel data technique to find out both the direct as well as the indirect impact of trade, industrial dissimilarity and FDI on the business cycle synchronisation of Euro-zone economies. The period of analysis is 1990 to 2009. The estimated results reveal that trade, industrial dissimilarity and FDI have both direct and indirect effect on the business cycle synchronization of sample economies. While the reported EC3SLS estimates show that closer trade ties among these Euro-zone countries have led to more synchronized business cycle co-movements because common disturbances are more prevalent and intra-industry trade dominates; the bilateral FDI flows have served as a source of disturbance rather than a source of synchronization.