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The euro’s trade effects

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  • Baldwin, Richard E.

Abstract

This paper reviews reassesses the methodology and principal findings of the “Rose effect”, i.e. the trade effects of currency union, looking at both EMU and non-EMU currency unions. The consensus estimate suggests that the euro has already boosted intra-euro area trade by five to ten percent. The paper discusses a gamut of models that might explain the Rose effect in Europe and suggests a series of empirical test that could help identify the economic mechanisms involved. JEL Classification: F12, C33, E0

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 0594.

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Date of creation: Mar 2006
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Handle: RePEc:ecb:ecbwps:20060594

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Related research

Keywords: Exchange rate volatility; Gravity Model; monetary union; Rose effect;

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References

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  18. Frankel, Jeffrey, 2004. "Real Convergence and Euro Adoption in Central and Eastern Europe: Trade and Business Cycle Correlations as Endogenous Criteria for Joining EMU," Working Paper Series rwp04-039, Harvard University, John F. Kennedy School of Government.
  19. Volker Nitsch, 2000. "National borders and international trade: evidence from the European Union," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 1091-1105, November.
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  21. Torsten Persson, 2001. "Currency unions and trade: how large is the treatment effect?," Economic Policy, CEPR & CES & MSH, vol. 16(33), pages 433-462, October.
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