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The dynamic effects of a currency union on trade

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  • Bergin, Paul R.
  • Lin, Ching-Yi

Abstract

The response of trade to a monetary union is a dynamic process. An empirical study of the European monetary union finds that the extensive margin of trade in new goods responded several years ahead of EMU implementation and ahead of overall trade volume. A dynamic rational expectations trade model shows that early entry of new firms in anticipation is explainable as a rational forward-looking response to news. The model helps identify which types of trading frictions are reduced by a currency union, and shows how new entry can be affected by uncertainty about EMU.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 87 (2012)
Issue (Month): 2 ()
Pages: 191-204

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Handle: RePEc:eee:inecon:v:87:y:2012:i:2:p:191-204

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Web page: http://www.elsevier.com/locate/inca/505552

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Keywords: Currency union; Extensive margin of trade; Trade costs;

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References

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Citations

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Cited by:
  1. Campbell, Douglas L., 2013. "Relative Prices, Hysteresis, and the Decline of American Manufacturing," MPRA Paper 51723, University Library of Munich, Germany.
  2. Auray, Stéphane & Eyquem, Aurélien & Poutineau, Jean-Christophe, 2012. "The effect of a common currency on the volatility of the extensive margin of trade," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1156-1179.
  3. 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.
  4. Christoph Moser & Andrew K. Rose, 2011. "Who Benefits from Regional Trade Agreements? The View from the Stock Market," NBER Working Papers 17415, National Bureau of Economic Research, Inc.
  5. Cavallari, Lilia & D'Addona, Stefano, 2013. "Trade margins and exchange rate regimes: new evidence from a panel VAR," MPRA Paper 51585, University Library of Munich, Germany.
  6. Paul Bergin & Ling Feng & Ching-Yi Lin, 2014. "Financial Frictions and Firm Dynamics," NBER Working Papers 20099, National Bureau of Economic Research, Inc.
  7. Douglas L. Campbell, 2013. "Estimating the Impact of Currency Unions on Trade: Solving the Glick and Rose Puzzle," The World Economy, Wiley Blackwell, vol. 36(10), pages 1278-1293, October.
  8. Florian Mölders, 2012. "On the Path to Trade Liberalization: Political Regimes in International Trade Negotiations," Discussion Papers of DIW Berlin 1245, DIW Berlin, German Institute for Economic Research.
  9. Mario Larch , & Wolfgang Lechthaler, 2011. "Whom to Send to Doha? The Shortsighted Ones!," Kiel Working Papers 1695, Kiel Institute for the World Economy.
  10. Kemal Türkcan, 2014. "Investigating the Role of Extensive Margin, Intensive Margin, Price and Quantity Components on Turkey’s Export Growth during 1998-2011," Working Papers 2014/2, Turkish Economic Association.
  11. Türkcan, Kemal, 2014. "Exports Margins in Austria’s Export Growth," MPRA Paper 53085, University Library of Munich, Germany.

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