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The nonlinear impact of currency unions on bilateral trade

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  • Katayama, Hajime
  • Melatos, Mark

Abstract

Most gravity model specifications assume that a currency union varies the level of bilateral trade between members by a constant proportion. We demonstrate that a common currency also alters the slope of the relationship between bilateral trade and member country GDPs.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 112 (2011)
Issue (Month): 1 (July)
Pages: 94-96

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Handle: RePEc:eee:ecolet:v:112:y:2011:i:1:p:94-96

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Currency union Gravity model Common currency;

References

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  1. Reuven Glick & Andrew K. Rose, 2001. "Does a Currency Union Affect Trade? The Time Series Evidence," NBER Working Papers 8396, National Bureau of Economic Research, Inc.
  2. Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc.
  3. Santos Silva, Joao & Tenreyro, Silvana, 2005. "The Log of Gravity," CEPR Discussion Papers 5311, C.E.P.R. Discussion Papers.
  4. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate Of The Effect Of Common Currencies On Trade And Income," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 437-466, May.
  5. Andrew K. Rose, 2001. "Currency unions and trade: the effect is large," Economic Policy, CEPR & CES & MSH, vol. 16(33), pages 449-461, October.
  6. Torsten Persson, 2001. "Currency unions and trade: how large is the treatment effect?," Economic Policy, CEPR & CES & MSH, vol. 16(33), pages 433-462, October.
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Cited by:
  1. Douglas Campbell, 2012. "Estimating the Impact of Currency Unions on Trade Using a Dynamic Gravity Framework," Working Papers 121, University of California, Davis, Department of Economics.

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