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The Single Currency's Effects on Eurozone Sectoral Trade: Winners and Losers?

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  • Vicarelli, Claudio
  • De Santis, Roberta
  • De Nardis, Sergio

Abstract

In this paper we study the effect of the single currency across industries for euro area members. This analysis may help to shed light on the main factors influencing the euro effect on trade flows. We intend to verify whether these factors are specific to individual sectors and/or countries or common to the entire euro area. We use a dynamic specification of an augmented gravity equation. Following the most recent econometric literature, we apply the ?System GMM? dynamic panel data estimator of Blundell and Bond to avoid inconsistency and biases in the estimates, and introduce controls for heterogeneity. Aggregate sector results average out country-level behaviours that, on their turn, are affected by different (unobserved) responses of firms, endowed with diverse production costs, to the enhancing and dampening impacts due to the euro. Due to this reason, the cancelling out at aggregate level of heterogenous behaviours induces an aggregation bias. So it is not surprising that when moving from sector to sector/country analysis the picture becomes much more variegated, with the emergence of a whole range of winners and lossers among industries in the different nation. Our empirical results are in line with theoretical framework we assumed as reference that considers the possibility of both stimulative and dampening effects coming from trade integration and points out the fact that sector exports impacts are the aggregation results of firm-level heterogenous behaviours. --

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Bibliographic Info

Article provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.

Volume (Year): 2 (2008)
Issue (Month): 17 ()
Pages: 1-34

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Handle: RePEc:zbw:ifweej:7330

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Keywords: International trade; currency unions; gravity models; dynamic panel data; Blundell-Bond estimates;

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References

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  1. Luca De Benedictis & Roberta De Santis & Claudio Vicarelli, 2005. "Hub-and-Spoke or else? Free trade agreements in the “enlarged” European Union," ISAE Working Papers 52, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
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  16. Alejandro Micco & Ernesto Stein & Guillermo OrdoÒez, 2003. "The currency union effect on trade: early evidence from EMU," Economic Policy, CEPR & CES & MSH, vol. 18(37), pages 315-356, October.
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Citations

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Cited by:
  1. Tomáš Havránek, 2010. "Rose effect and the euro: is the magic gone?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 146(2), pages 241-261, June.
  2. Aristovnik, Aleksander & Matevz, Meze, 2009. "The Economic and Monetary Union’s effect on (international) trade: the case of Slovenia before euro adoption," MPRA Paper 17445, University Library of Munich, Germany.
  3. Sergio de Nardis & Roberta De Santis & Claudio Vicarelli, 2008. "The Euro's Effects on Trade in a Dynamic Setting," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 5(1), pages 73-85, June.
  4. Tomáš Havránek, 2009. "Rose Effect and the Euro: The Magic is Gone," Working Papers IES 2009/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Aug 2009.
  5. Guglielmo Maria Caporale & Thouraya Hadj Amor & Christophe Rault, 2011. "Sources of Real Exchange Rate Volatility and International Financial Integration: A Dynamic GMM Panel Approach," CESifo Working Paper Series 3645, CESifo Group Munich.
  6. Claudio, Vicarelli & Carmine, Pappalardo, 2012. "Euro introduction and export behaviour of Italian firms," MPRA Paper 43386, University Library of Munich, Germany.
  7. de santis, roberta, 2011. "Impact of environmental regulations on trade in the main EU countries: conflict or synergy?," MPRA Paper 37756, University Library of Munich, Germany.
  8. Sergio de Nardis & Carmine Pappalardo & Claudio Vicarelli, 2008. "The Euro adoption’s impact on extensive and intensive margins of trade: the Italian case," ISAE Working Papers 101, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  9. Christodoulopoulou, Styliani, 2010. "THE Effects of Multilateral Trade Liberalization on the Extensive and the Intensive Margins of Trade," MPRA Paper 29169, University Library of Munich, Germany.
  10. Jan Zilinsky, 2009. "What Determines Borrowing Costs of EU Countries," Working and Discussion Papers WP 4/2009, Research Department, National Bank of Slovakia.

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