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Zooming Out: The Trade Effect of the Euro in Historical Perspective

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  • Helge Berger
  • Volker Nitsch

Abstract

In 1999, eleven European countries formed the Economic and Monetary Union (EMU); they abandoned their national currencies and adopted a new common currency, the euro. Several recent papers argue that the introduction of the euro has led (by itself) to a sizable and statistically significant increase in trade between the member countries of EMU. In this paper, we put the trade effect of the euro in historical perspective. We argue that the creation of the EMU was a continuation (or culmination) of a series of previous policy changes that have led over the last five decades to greater economic integration among the countries that now constitute EMU. Using a data set that includes 22 industrial countries from 1948 to 2003, we find strong evidence of a gradual increase in trade intensity between European countries. Once we control for this trend in trade integration, the euro’s impact on trade disappears. Moreover, a significant part of the trend in European trade integration is explained by measurable policy changes.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1435.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1435

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Keywords: monetary union; currency; euro; trade; European integration;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Scene dalla vita di provincia: prefazione
    by Alberto Bagnai in Goofynomics on 2013-06-27 08:04:00
  2. The Euro at Ten: Why Do Effects on Trade Among Members Fall Short of Historical Estimates in Smaller Monetary Unions?
    by ? in Jeff Frankels Weblog on 2008-12-25 05:14:34
  3. The Euro at Ten: Why Do Effects on Trade Among Members Fall Short of Historical Estimates in Smaller Monetary Unions?
    by jfrankel in Jeff Frankels Weblog on 2008-12-25 05:14:34
  4. Postfazione a Europa Kaputt di A.M. Rinaldi
    by Alberto Bagnai in Goofynomics on 2013-06-25 12:06:00
  5. Smoke sales
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