Two Islands - Two Monies: the Effect of Breaking the Sterling Link on Anglo-Irish Trade

B. Walsh

Working Papers from College Dublin, Department of Political Economy-

Abstract: This paper studies the effect on Anglo-Irish trade breaking the link between the Irish pound and sterling in 1979. A gravity model is used to explore this issue. No evidence is found of a structural break following the dismantling of the currency union. Nor did the resultant exchange rate volatility have a significant adverse effect on trade. These results do not support the belief that currency unions result in increased trade flows, either directly or by reducing exchange rate volatility.

Keywords: CURRENCIES; TRADE; IRELAND; UNITED KINGDOM; MONETARY UNION; EXCHANGE RATE (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:fth:dublec:00/06

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