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Revisiting Rose’s common currency debate

Maria Santana-Gallego (), Francisco Ledesma () and Jorge Pérez-Rodríguez ()
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Maria Santana-Gallego: Universidad de La Laguna

Authors registered in the RePEc Author Service: Maria Santana Gallego ()

No 10-02, Working Papers from Asociación Española de Economía y Finanzas Internacionales

Abstract: The main objective of this research is to revisit the estimation of the effect of a common currency on international trade by applying the new methodology proposed by Helpman, Melitz and Rubistein (2008) and incorporating tourism to the theoretical framework. Rose (2000) estimates an empirical model of bilateral trade, finding a significant coefficient for a currency union variable of 1.2, suggesting an effect of currency unions on trade of over a 200%. Rose (2000)´s finding did not receive full acceptance and further research was consequently devoted to find reasons of such high effect. This still remains as a major puzzle in the International Economics. Rose and Van Wincoop (2001) hold that there may still be some omitted factors that drives countries to both participate in currency unions and trade more. In this research a gravity equation for trade is estimated controlling by international tourism.

Keywords: Currency unions; international trade; tourism; gravity equations (search for similar items in EconPapers)
JEL-codes: F10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int, nep-mon and nep-tur
Date: 2010-02
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Persistent link: https://EconPapers.repec.org/RePEc:aee:wpaper:1002

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