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In the neighborhood: The trade effects of the Euro in a spatial framework

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  • Kelejian, Harry
  • Tavlas, George S.
  • Petroulas, Pavlos

Abstract

Trade is spatial in nature. However, when specifying trade regressions, spatial issues are typically not accounted for in a satisfactory way. We specify a trade model which relates to the effects that the introduction of the euro had on exports for the euro countries. Our model contains country pair fixed effects and error terms which are spatially and time autocorrelated, as well as heteroskedastic. Our spatial weighting matrix has unique characteristics. Our model also allows for endogenous regressors, and so we estimate it by an instrumental variable procedure. We find that the results of estimation are substantially affected when one accounts for statistical complications. Specifically, the intra euro effects on exports are significantly reduced and are only “borderline” significant. Also, dummy variables measuring the effects of EU membership on exports become insignificant. The results relating to other variables do not seem to be substantially affected. All of this suggests that, perhaps, the effects of currency unions on trade as described in the previous literature have been overstated.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 42 (2012)
Issue (Month): 1-2 ()
Pages: 314-322

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Handle: RePEc:eee:regeco:v:42:y:2012:i:1:p:314-322

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

Related research

Keywords: Trade; EMU; Spatial econometrics; Panel data;

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References

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Citations

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Cited by:
  1. Kadiyali, Vrinda & Kosová, Renáta, 2013. "Inter-industry employment spillovers from tourism inflows," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 272-281.
  2. Paolo Sgrignoli & Rodolfo Metulini & Stefano Schiavo & Massimo Riccaboni, 2013. "The Relation Between Global Migration and Trade Networks," Working Papers 6/2013, IMT Institute for Advanced Studies Lucca, revised Oct 2013.
  3. Campbell, Douglas L., 2011. "Estimating the impact of currency unions on trade using a dynamic gravity framework," MPRA Paper 35531, University Library of Munich, Germany.
  4. Parent, Olivier & LeSage, James P., 2012. "Spatial dynamic panel data models with random effects," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 727-738.
  5. Mariam Camarero & Estrella Gómez & Cecilio Tamarit, 2012. "EMU and intra-European trade. Long-run evidence using gravity equations," ThE Papers 10/25, Department of Economic Theory and Economic History of the University of Granada..
  6. Rodolfo Metulini, 2013. "Spatial gravity models for international trade: a panel analysis among OECD countries," ERSA conference papers ersa13p522, European Regional Science Association.

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