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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

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: F4 F21 F12 F33 (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
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Related works:
Working Paper: Euros and Zeros: The Common Currency Effect on Trade in New Goods (2006) Downloads
Working Paper: Euros and Zeros: The Common Currency Effect on Trade in New Goods (2006) Downloads
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