Bayesian estimation of the Eurozone currency union effect

Ronaldo Carpio and Meixin Guo

Review of International Economics, 2021, vol. 29, issue 3, 511-532

Abstract: This paper uses Bayesian methods to estimate the European (Monetary) Union effect on trade. The high dimensionality of the parameter space when estimating gravity equations with many dummy variables results in standard hypothesis tests with a large Type I (false positive) error. Bayesian methods are able to handle this problem; they also provide a principled method of model selection that can be applied to different specifications of the dummy variables. Bayesian model selection tests prefer our most unrestricted dummy specification, which includes asymmetric bilateral effects, as well as time‐varying, country‐specific factors. Our estimate shows a zero Euro effect on trade, but a 14.8% increase in imports for a member of the European Union during 1980–2004.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/roie.12518

Related works:
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:bla:reviec:v:29:y:2021:i:3:p:511-532

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0965-7576

Access Statistics for this article

Review of International Economics is currently edited by E. Kwan Choi

More articles in Review of International Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().