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The euro's effect on trade: an analysis of "old" and "new" EMU members

Isaac Mensah

Review of Economics and Institutions, 2019, vol. 10, issue 1

Abstract: This paper provides new empirical evidence of the ``euro effect" on bilateral trade by allowing for a heterogeneous impact on ``new" and ``old" EMU members. By applying a Poisson estimator and focusing on a sample of 38 countries, our results show a positive but statistically insignificant euro’s effect on bilateral exports. However, disaggregating this effect, we report a relatively large euro’s effect on bilateral trade for the “new†EMU countries. We also find no evidence of trade diversion, thus corroborating existing evidence. These results are robust to a number of sensitivity checks and, especially, to the use of a larger sample of countries. Finally, using country-pair and country-industry-pair data, our results indicate a reduction in export concentration in the bilateral trade of ``old" EMU countries. Instead, we find an increase in concentration in trade between ``new" and ``old" EMU countries.

Keywords: Gravity model; bilateral export; poisson; euro (search for similar items in EconPapers)
JEL-codes: F4 F14 F15 F33 C33 (search for similar items in EconPapers)
Date: 2019
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