The Impact of Euro on Trade: The (Early) Effect is not so Large
Sergio de Nardis and
Claudio Vicarelli
No 31, ISAE Working Papers from ISTAT - Italian National Institute of Statistics - (Rome, ITALY)
Abstract:
We investigate the impact of the euro adoption on commercial transactions of EMU countries. We refer to the abundant gravity-model literature about the effect of Currency Unions on trade originated by Rose (2000). We adapt this kind of modelling to the specific case of the European Monetary Union drawing from former literature some guidelines that can be summed up as follows: distinction of “pure” common currency from exchange rate volatility effect; selection of sample of countries strictly focussed on EMU economies; consideration of time as well as space dimension; inclusion of other political factors promoting integration. We add to these provisions the observation that the panel estimation of the gravity equation must be dynamic, because EMU is a young phenomenon, where short run effects, like trade persistence, may play a crucial role. Our main finding is that the euro adoption has had a positive but not exorbitant impact on bilateral trade of European countries (the estimated percentage increase ranges between 2.6 and 6.3%), much lower than that derivable from Roses’s estimates referred to a larger and heterogeneous set of countries (providing a trade increase following the adoption of a common currency by as much as 200%). Our results refer to short-run impacts; long-run effects could be stronger (but, in our opinion, they certainly are not by the order indicated in the existing literature), particularly if the structural change implied by the new currency regime (intra-EMU trade is potentially equivalent to domestic trade) becomes completely interiorised in the perception and the behaviours of Euroland citizens.
Keywords: Bilateral; Economic Integration; Dynamic Panel Data (search for similar items in EconPapers)
JEL-codes: C23 F15 F4 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2003-01
References: Add references at CitEc
Citations: View citations in EconPapers (30)
Downloads: (external link)
http://lipari.istat.it/digibib/Working_Papers/vicarelli31.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found
Related works:
Working Paper: The Impact of the Euro on Trade: The (Early) Effect is Not So Large (2003)
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:isa:wpaper:31
Access Statistics for this paper
More papers in ISAE Working Papers from ISTAT - Italian National Institute of Statistics - (Rome, ITALY) Contact information at EDIRC.
Bibliographic data for series maintained by Stefania Rossetti (strosset@istat.it).