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Euros and Zeros: The Common Currency Effect on Trade in New Goods

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Author Info
Baldwin, Richard
Di Nino, Virginia

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Abstract

This paper tests whether trade in new goods is partially responsible for the pro-trade effects of the euro and provides a measure of the size of the effect. It works with a very large data set (about 16 million observations) covering twenty countries at the most disaggregated level of trade data that is publicly available. Using predictions from a heterogeneous-firms trade model in a multi-country environment to structure our empirical model, we find that the euro had a positive impact on trade overall. Our findings provide supportive but not conclusive evidence for the new-goods hypothesis. We also determined the pro-trade effect of euro-usage on non-Euroland nations trading with euro-users. We confirmed the absence of trade diversion for non-Eurozone EU members with sizeable overall increase comparable to that of members.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5973.

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Date of creation: Dec 2006
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Handle: RePEc:cpr:ceprdp:5973

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Related research
Keywords: Eurozone trade effects; extensive margin; heterogenous firms; Melitz model;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
  2. Elisa Gamberoni, . "Do unilateral trade preferences help export diversification? An investigation of the impact of European unilateral trade preferences on the extensive and intensive margin of trade," HEI Working Papers 17-2007, Economics Section, The Graduate Institute of International Studies. [Downloadable!]
  3. Alberto Amurgo-Pacheco, Martha Denisse Pierola, 2007. "Patterns of export diversification in developing countries: intensive and extensive margins," HEI Working Papers heiwp20-2007, Economics Section, The Graduate Institute of International Studies, revised Jul 2007. [Downloadable!]
    Other versions:
  4. Ansgar Belke & Julia Spies, 2008. "Enlarging the EMU to the east: what effects on trade?," Empirica, Springer, vol. 35(4), pages 369-389, September. [Downloadable!] (restricted)
    Other versions:
  5. Paul R. Bergin & Ching-Yi Lin, 2008. "Exchange Rate Regimes and the Extensive Margin of Trade," NBER Working Papers 14126, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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