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Breaking badly: The currency union effect on trade

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  • Campbell, Douglas L.
  • Chentsov, Aleksandr

Abstract

As several European countries debate entering, or exiting, the euro, a key policy question concerns how much currency unions (CUs) affect trade. Despite the longstanding academic debate on the topic, recent research has continued to find that CUs exert a large effect on trade. We find, by contrast, that the sizeable recent estimated impact of CUs on trade is driven by other major geopolitical events and is also sensitive to dynamic controls. Overall, using various specifications and controls, we estimate that the impact of CUs on trade is indistinct from zero but with relatively large standard errors.

Suggested Citation

  • Campbell, Douglas L. & Chentsov, Aleksandr, 2023. "Breaking badly: The currency union effect on trade," Journal of International Money and Finance, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:jimfin:v:136:y:2023:i:c:s0261560623000414
    DOI: 10.1016/j.jimonfin.2023.102840
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    References listed on IDEAS

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    More about this item

    Keywords

    Euro; Currency union effect; Gravity estimation;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F54 - International Economics - - International Relations, National Security, and International Political Economy - - - Colonialism; Imperialism; Postcolonialism

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