Currency Unions and Trade: A Post-EMU Mea Culpa

Reuven Glick and Andrew Rose

No 21535, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In our European Economic Review (2002) paper, we used pre-1998 data on countries participating in and leaving currency unions to estimate the effect of currency unions on trade using (then-) conventional gravity models. In this paper, we use a variety of empirical gravity models to estimate the currency union effect on trade and exports, using recent data which includes the European Economic and Monetary Union (EMU). We have three findings. First, our assumption of symmetry between the effects of entering and leaving a currency union seems reasonable in the data but is uninteresting. Second, EMU typically has a smaller trade effect than other currency unions; it has a mildly stimulating effect at best. Third and most importantly, estimates of the currency union effect on trade are sensitive to the exact econometric methodology; the lack of consistent and robust evidence undermines confidence in our ability to reliably estimate the effect of currency union on trade.

JEL-codes: F15 F33 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-eec, nep-int, nep-mon and nep-opm
Note: IFM ITI
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Citations: View citations in EconPapers (34)

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Working Paper: Currency Unions and Trade: A Post-EMU Mea Culpa (2015)
Working Paper: Currency unions and trade: a post-EMU mea culpa (2015)
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