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Dollarization does promote trade

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  • Lin, Shu
  • Ye, Haichun

Abstract

This study re-evaluates the treatment effect of dollarization on trade while explicitly controlling for self-selection of policy adoption. Employing a variety of propensity score matching methods, we show that dollarization not only increases bilateral US trade with dollarized countries, but promotes a dollarizer's bilateral trade with other dollar-zone countries as well.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 29 (2010)
Issue (Month): 6 (October)
Pages: 1124-1130

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Handle: RePEc:eee:jimfin:v:29:y:2010:i:6:p:1124-1130

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Web page: http://www.elsevier.com/locate/inca/30443

Related research

Keywords: Dollarization Bilateral trade Treatment effect Propensity score matching;

References

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  1. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
  2. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2003. "A generalized design for bilateral trade flow models," Economics Letters, Elsevier, vol. 80(3), pages 391-397, September.
  3. Dehejia, R.H. & Wahba, S., 1998. "Propensity Score Matching Methods for Non-Experimental Causal Studies," Discussion Papers, Columbia University, Department of Economics 1998_02, Columbia University, Department of Economics.
  4. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(4), pages 605-54, October.
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  7. Michael R. Pakko & Howard J. Wall, 2001. "Reconsidering the trade-creating effects of a currency union," Review, Federal Reserve Bank of St. Louis, issue May, pages 37-46.
  8. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate Of The Effect Of Common Currencies On Trade And Income," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(2), pages 437-466, May.
  9. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  10. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(2), pages 261-94, April.
  11. Michael W. Klein, 2002. "Dollarization and Trade," NBER Working Papers 8879, National Bureau of Economic Research, Inc.
  12. Rudi Dornbusch, 2001. "Fewer Monies, Better Monies," NBER Working Papers 8324, National Bureau of Economic Research, Inc.
  13. Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
  14. Volker Nitsch, 2002. "Honey, I Shrunk the Currency Union Effect on Trade," The World Economy, Wiley Blackwell, vol. 25(4), pages 457-474, 04.
  15. Torsten Persson, 2001. "Currency unions and trade: how large is the treatment effect?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 16(33), pages 433-462, October.
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