Currency Unions and Trade: A Post‐EMU Reassessment

Reuven Glick and Andrew Rose

No GRU_2016_016, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

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. Second, our preferred methodology indicates that EMU has boosted exports by around 50%. While other estimation techniques yield different results, a panel approach with both time‐varying country and dyadic fixed effects on a large span of data (across both countries and time) seems to deliver insensitive and reliable results. Third, different currency unions have different trade effects.

Keywords: gravity; exports; bilateral; common; fixed; time‐varying; country; specific (search for similar items in EconPapers)
JEL-codes: F15 F33 (search for similar items in EconPapers)
Pages: 36 pages
New Economics Papers: this item is included in nep-int
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Published in European Economic Review, Volume 87C, Pages 78-91

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https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232 ... w%20K_%20Rose(1).pdf (application/pdf)

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Journal Article: Currency unions and trade: A post-EMU reassessment (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cth:wpaper:gru_2016_016

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