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Currency Unions and Trade: Variations on Themes by Rose and Persson

Peter Kenen

No DP2002/08, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: Using a gravity equation, Andrew Rose finds that currency-union countries trade more intensively with each other than do other country pairs, and others report same result. Using a nonparametric test, however, Persson finds that trade flows between currency-union countries are not significantly different in size from other bilateral trade flows. Using another way to identify a currency-union country, this paper reproduces Persson's result but also produces an anomaly. When Rose's gravity equation is re-estimated using the data set furnished by the alternative definition of a currency-union country, Rose's result survives, although the currency-union effect is smaller than the effect he reported initially.

JEL-codes: F15 F33 (search for similar items in EconPapers)
Pages: 34p
Date: 2002-12
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (16) Track citations by RSS feed

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