Rose effect versus border effect: the Euro's impact on trade

Gianluca Cafiso

Applied Economics, 2011, vol. 43, issue 13, 1691-1702

Abstract: The purpose of this article is to test the common finding of a positive 'Rose Effect' (RE) in the case of the Euro through a comparison with an indicator of integration among the Euro Zone (EZ) countries: the 'Border Effect' (BE). This study of the Euro's impact using both the RE and the BE is a novelty in the literature. Our findings cast doubts about the supposed trade-costs reduction caused by the Euro, reduction which is the main explanation of the positive RE estimated in several works. Both indicators are estimated by means of a gravity model for bilateral trade flows using a panel of manufacture exports and production figures.

Date: 2011
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DOI: 10.1080/00036841003724437

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