The Trade and FDI Effects of EMU Enlargement

Jelle Brouwer, Richard Paap and Jean-Marie Viaene ()
Additional contact information
Jean-Marie Viaene: Erasmus University Rotterdam

No 07-077/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper considers the nature and the distribution of trade and FDI effects of a potential enlargement of the European Monetary Union (EMU) to the 10 countries that obtained EU membership in 2004. One-way and two-way error component gravity models are estimated using a data set of unbalanced panel data that combine bilateral trade flows among 29 countries and the distribution of outward FDI stocks among these countries. The results reveal a complementarity between trade and investment and a relationship between trade and exchange rate volatility that depend on the sign of bilateral trade balances. Using a simulation-based technique, we find that estimates of FDI effects of EMU range between 18.5% for Poland and 30% for Hungary.

This discussion paper has resulted in a publication in the Journal of International Money and Finance , 2008, 27(2), 188-208.

Keywords: EMU; exchange rate volatility; foreign investment; trade diversion; vertical integration (search for similar items in EconPapers)
JEL-codes: C33 F21 F31 F33 F36 (search for similar items in EconPapers)
Date: 2007-10-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://papers.tinbergen.nl/07077.pdf (application/pdf)

Related works:
Journal Article: The trade and FDI effects of EMU enlargement (2008)
Working Paper: The Trade and FDI Effects of EMU Enlargement (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20070077

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().