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The Welfare Gains Of Trade Integration In The European Monetary Union

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  • Auray, Stéphane
  • Eyquem, Aurélien
  • Poutineau, Jean-Christophe

Abstract

This paper evaluates the welfare gains arising from a deeper trade integration in the European Monetary Union. To do this, the European Monetary Union is represented in a realistic way by an intertemporal general equilibrium model with incomplete financial markets, sticky prices and home bias in both private consumption and production. The model is estimated and not rejected by the data. Two main results emerge : (i) an increase in vertical (intermediate goods) trade implies welfare gains while (ii) an increase in horizontal (final goods) trade implies welfare losses.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 14 (2010)
Issue (Month): 05 (November)
Pages: 645-676

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Handle: RePEc:cup:macdyn:v:14:y:2010:i:05:p:645-676_99

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