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In early January 2003, the United States and Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua launched official negotiations for the Central American Free Trade Agreement (CAFTA), a treaty that would expand NAFTA-style trade barrier reductions to Central America. With deeper trade integration between Central America and the United States, it is expected that there will be closer links in business cycles between Central American countries and the United States. The paper finds a relatively low degree of business cycle synchronization within Central America as well as between Central America and the United States. The business cycle synchronization is expected to increase only modestly with further trade expansion, making the coordination of macroeconomic policies within CAFTA somewhat less of a priority.

Business Cycle --- Business Cycle Fluctuations --- Business Cycle Synchronization --- Business Cycles --- Business Environment --- Business in Development --- Competitiveness and Competition Policy --- Currency --- Deeper Trade Integration --- Free Trade --- Free Trade Area --- Impact Of Trade --- Industrial Production --- Industry Trade --- International Economics & Trade --- Monetary Policy --- Private Sector Development --- Public Sector Development --- Regional Integration --- Regional Trade --- Specialization --- Trade Agreement --- Trade Expansion --- Trade Intensity --- Trade Structure