Euros and zeros: The common currency effect on trade in new goods

Richard Baldwin Virginia Di Nino
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Richard Baldwin Virginia Di Nino: IUHEI, The Graduate Institute of International Studies, Geneva, http://hei.unige.ch/baldwin
Authors registered in the RePEc Author Service: Virginia Di Nino and Richard Baldwin

No 21-2006, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: This paper tests whether trade in new goods were partially responsible for the pro-trade effects of the euro and provides a measure of the size of the effect. It works with a very large data (about 16 million observations) set covering twenty countries at the most disaggregated level of trade data that is publicly available. Using predictions from a heterogeneous-firms trade model in a multi-country environment to structure our empirical model, we find that the euro had a positive impact on trade overall. Our findings provide supportive but not conclusive evidence for the new-goods hypothesis. We also determined the pro-trade effect of euro-usage on non-Euroland nations trading with euro-users. We confirmed the absence of trade diversion for non-Eurozone EU members with sizeable overall increase comparable to that of members.

Keywords: heterogeneous firms; Eurozone trade effects; Melitz model; extensive margin. (search for similar items in EconPapers)
JEL-codes: F12 F21 F33 F4 (search for similar items in EconPapers)
Pages: 25
Date: 2006-09, Revised 2006-10-31
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (77)

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http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIWP21-2006.pdf (application/pdf)

Related works:
Working Paper: Euros and Zeros: The Common Currency Effect on Trade in New Goods (2006)
Working Paper: Euros and Zeros: The Common Currency Effect on Trade in New Goods (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heiwp21-2006

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