Regional welfare effects of the European Monetary Union
In: Spatial implications of the European Monetary Union
AbstractThis paper estimates welfare effects resulting from reduced transaction costs in international trade, using a static multiregional general equilibrium model. The kernel of the model is the trade part specified in Dixit-Stiglitz-style. Interregional trade shows a gravity pattern due to transaction costs depending on distance. Transaction cost reductions brought about by EMU are based on econometric estimates by GLICK and ROSE, relying on trade intensification following the establishment of other currency unions worldwide. According to our results EMU could imply a welfare gain for the participating countries amounting to 1% of GDP annually. Our simulation results show that this concern that the spatial effect of EMU might contradict the cohesion objectives of the European Union is not to be substantiated. Regions close to the borders are supposed to have the highest trade intensities with partner countries and therefore gain most from saving of transaction costs in international trade. --
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This item is provided by Akademie für Raumforschung und Landesplanung (ARL) - Leibniz-Forum für Raumwissenschaften in its series Studies in Spatial Development: Chapters with number 59985.
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Boston College Working Papers in Economics
485, Boston College Department of Economics.
- James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
- James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
- 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.
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