The Welfare Gains of Trade Integration in the European Monetary Union

Stéphane Auray, Aurélien Eyquem and Jean-Christophe Poutineau ()

No 927, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: This paper evaluates the welfare gains arising from a deeper trade integration in the European Monetary Union. To do this, the European Monetary Union is represented in a realistic way by an intertemporal general equilibrium model with incomplete financial markets, sticky prices and home bias both in private consumption and production. The model is estimated and globally not rejected by the data. Two main results emerge : (i) an increase in vertical (intermediate goods) trade implies welfare gains while (ii) an increase in horizontal trade implies welfare losses.

Keywords: trade integration; inflation differentials; welfare analysis; optimal currency areas (search for similar items in EconPapers)
JEL-codes: F32 F41 F47 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2009
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Downloads: (external link)
ftp://ftp.gate.cnrs.fr/RePEc/2009/0927.pdf (application/pdf)

Related works:
Journal Article: THE WELFARE GAINS OF TRADE INTEGRATION IN THE EUROPEAN MONETARY UNION (2010)
Working Paper: The welfare gains of trade integration in the European monetary union (2010)
Working Paper: The Welfare Gains of Trade Integration in the European Monetary Union (2009)
Working Paper: The Welfare Gains of Trade Integration in the European Monetary Union (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:gat:wpaper:0927

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