Monetary Union, Trade Integration, and Business Cycles in 19th Europe

Marc Flandreau () and Mathilde Maurel
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Marc Flandreau: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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Abstract: This paper studies the impact of monetary arrangements on trade integration and business cycle correlation in late 19th century Europe. We estimate a gravity model and show that tighter monetary integration was associated with substantially higher trade, as in recent studies using contemporary data. For instance, the Austro-Hungarian monetary union improved trade between member states by a factor of 3. To explain this, we build and estimate a simple model where greater monetary integration weakens the current account constraint by fostering business cycle co-movements.

Keywords: optimum currency areas; endogeneity; trade; business cycles; monetary union (search for similar items in EconPapers)
Date: 2005-04
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00308756
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Published in Open Economies Review, 2005, 16 (2), pp.135-152. ⟨10.1007/s11079-005-5872-4⟩

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Working Paper: Monetary Union, Trade Integration, and Business Cycles in 19th Europe (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:halshs-00308756

DOI: 10.1007/s11079-005-5872-4

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