Reconsidering the trade-creating effects of a currency union

Michael Pakko and Howard Wall

Review, 2001, vol. 83, issue May, 37-46

Abstract: This paper reconsiders recent empirical evidence found by Andrew Rose that countries adopting a common currency will triple their bilateral trade. The authors find that this large estimated effect is due to estimation bias arising from missing and/or misspecified time-variant factors rather than to the adoption of a common currency. The results of this study, obtained with a general specification of time-variant factors, indicate that a common currency actually leads to a small reduction in trade over a 5-year period, although this result is not statistically different from zero. The authors also find that over 10- and 20-year periods, trade volumes are more than halved by the adoption of a common currency.

Keywords: International trade; Money (search for similar items in EconPapers)
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

Downloads: (external link)
https://files.stlouisfed.org/files/htdocs/publications/review/01/09/0109mp.pdf (application/pdf)

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:fip:fedlrv:y:2001:i:may:p:37-46:n:v.83no.5

Access Statistics for this article

Review is currently edited by Juan M. Sanchez

More articles in Review from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().