Currency Unions, Trade Flows, and Capital Flows

James Yetman

No 182003, Working Papers from Hong Kong Institute for Monetary Research

Abstract: Trade within currency unions has been shown to be much larger than outside of currency unions, even after factoring in many relevant variables. The existing empirical evidence is based on reduced form models of trade, and therefore indicates that there exists a high correlation between currency union membership and trade, but does not indicate the causality, or the mechanism at work. This paper argues that the balance of evidence points to a large and statistically significant causal relationship from currency unions to trade, and then considers two possible mechanisms behind this: (1) being a member of a currency union reduces trade resistance; and (2) being a member of a currency union reduces investment resistance. Based on a small theoretical model that incorporates both of these, we argue that both mechanisms are important in explaining the economic impact of currency union membership.

Pages: 22 pages
Date: 2003-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.hkimr.org/uploads/publication/268/ub_full_0_2_7_wp200318_text.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.hkimr.org/uploads/publication/268/ub_full_0_2_7_wp200318_text.pdf [301 Moved Permanently]--> http://www.aof.org.hk/research/HKIMR/uploads/publication/268/ub_full_0_2_7_wp200318_text.pdf [301 Moved Permanently]--> https://www.aof.org.hk/research/HKIMR/uploads/publication/268/ub_full_0_2_7_wp200318_text.pdf)

Related works:
Journal Article: CURRENCY UNIONS, TRADE FLOWS AND CAPITAL FLOWS (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hkm:wpaper:182003

Access Statistics for this paper

More papers in Working Papers from Hong Kong Institute for Monetary Research Contact information at EDIRC.
Bibliographic data for series maintained by HKIMR ().