The role of cross-sectional heterogeneity for magnitude and timing of the euro's trade effect

Helmut Herwartz and Henning Weber

Journal of International Money and Finance, 2013, vol. 37, issue C, 48-74

Abstract: This paper examines the role of cross-sectional heterogeneity for estimating the euro's effect on euro-area trade. In the empirical analysis, the impact of trade costs on trade and the transition dynamics to the new monetary regime can vary cross-sectionally in trade sectors and country pairs. Unobserved state variables that account for time-varying and omitted trade costs and multilateral resistance terms can also vary cross-sectionally. The results show that cross-sectional heterogeneity is strongly supported by the data and that the average euro effect coincides with consensus estimates. Decomposing the average effect uncovers large cross-sectional heterogeneity in its magnitude. Also, the average trade effect unfolds only gradually over time, since it is composed of many trade sectors that adjust at different dates.

Keywords: Euro's trade effect; Coefficient heterogeneity; Smooth transition function (search for similar items in EconPapers)
JEL-codes: C31 C33 F13 F15 F33 F42 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560613000508
Full text for ScienceDirect subscribers only

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:eee:jimfin:v:37:y:2013:i:c:p:48-74

DOI: 10.1016/j.jimonfin.2013.05.001

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().