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EMU impact of on third countries’ exports. A gravity approach

Estrella Gómez-Herrera () and Juliette Milgram Baleix ()

No 10/26, ThE Papers from Department of Economic Theory and Economic History of the University of Granada.

Abstract: In this article we explore the impact of the euro adoption and the effect of the volatility of the real exchange rate on trade both on intra EMU trade and on EMU trade with third countries. To this end, we use a large database covering 93% of world trade that includes 80 countries during the period 1980-2009. We estimate a gravity equation using one of the most complete specifications in the literature to isolate the euro effect from other factors affecting trade, as regional trade agreements or exchange rate volatility. Our results show that the elimination of the volatility boosted export per se especially before 1999 and therefore, the possibility to peg to the euro could boost trade of third countries and between these third countries.

Keywords: Gravity equation; International trade; Exchange rate (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-05-25
New Economics Papers: this item is included in nep-eec and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:gra:wpaper:10/26

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