Does currency matter for regional trade integration?

Qing He, Ce Zhang and Wenyu Zhu

International Review of Economics & Finance, 2021, vol. 76, issue C, 1219-1234

Abstract: This paper examines the determinants of regional trade integration using information on trade and foreign exchange turnovers for the majority of the Regional Trade Agreements (RTAs) worldwide. We find a U-shaped relationship between the degrees of currency integration and trade integration within RTAs. When the share of the most frequently used regional currency is low, using the local currency impedes intra-RTA trade. However, upon exceeding a certain threshold, currency integration enhances intra-RTA trade. Moreover, the currency-trade-integration relationship varies with a few key RTA characteristics, including the number of member countries, differences in economic development among member countries, and trade and financial openness.

Keywords: Currency integration; Trade integration; Regional trade agreement (search for similar items in EconPapers)
JEL-codes: F33 F36 G15 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:76:y:2021:i:c:p:1219-1234

DOI: 10.1016/j.iref.2019.11.010

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