Currency Unions and Trade: A Post-EMU Mea Culpa

Andrew Rose and Reuven Glick

No 10615, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In our European Economic Review (2002) paper, we used pre-1998 data on countries participating in and leaving currency unions to estimate the effect of currency unions on trade using (then-) conventional gravity models. In this paper, we use a variety of empirical gravity models to estimate the currency union effect on trade and exports, using recent data which includes the European Economic and Monetary Union (EMU). We have three findings. First, our assumption of symmetry between the effects of entering and leaving a currency union seems reasonable in the data but is uninteresting. Second, EMU typically has a smaller trade effect than other currency unions, often estimated to be negligible or negative. Third and most importantly, estimates of the currency union effect on trade are sensitive to the exact econometric methodology; we find no substantive reliable and robust effect of currency union on trade.

Keywords: Bilateral; Common; Country; Exports; Fixed; Gravity; Poisson; Specific; Time-varying (search for similar items in EconPapers)
JEL-codes: F15 F33 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-eec, nep-int, nep-mon and nep-opm
References: View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Working Paper: Currency unions and trade: a post-EMU mea culpa (2015)
Working Paper: Currency Unions and Trade: A Post-EMU Mea Culpa (2015)
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