Two islands – two monies: the effect of breaking the Sterling link on Anglo-Irish trade

Brendan M. Walsh

No 200006, Working Papers from School of Economics, University College Dublin

Abstract: This paper studies the effect on Anglo-Irish trade of breaking the link between the Irish pound and sterling in 1979. A gravity model is used to explore this issue. No evidence is found of a structural break following the dismantling of the currency union. Nor did the resultant exchange rate volatility have a significant adverse effect on trade. These results do not support the belief that currency unions result in increased trade flows, either directly or by reducing exchange rate volatility.

Keywords: Anglo-irish trade; Monetary policies; Currency; Trade flows; Gravity model; Volatility; Exchange rate; Ireland; Sterling; Monetary policy--Ireland; Foreign exchange rates--Econometric models--Ireland; Ireland--Commerce--Great Britain; Great Britain--Commerce--Ireland (search for similar items in EconPapers)
JEL-codes: F33 (search for similar items in EconPapers)
Date: 2000
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http://hdl.handle.net/10197/3041 First version, 2000 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:200006

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