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Does a currency union affect trade? the time series evidence

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Reuven Glick
Andrew K. Rose

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Abstract

Does leaving a currency union reduce international trade? We answer this question using a large annual panel data set covering 217 countries from 1948 through 1997. During this sample a large number of countries left currency unions; they experienced economically and statistically significant declines in bilateral trade, after accounting for other factors. Assuming symmetry, we estimate that a pair of countries that starts to use a common currency experiences a near doubling in bilateral trade.

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Paper provided by Federal Reserve Bank of San Francisco in its series Working Papers in Applied Economic Theory with number 2001-13.

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Date of creation: 2001
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Publication status: Published in European Economic Review, Vol. 46, No. 6 , June 2002, Pages 1125-1151
Handle: RePEc:fip:fedfap:2001-13

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Keywords: Foreign exchange ; Trade;

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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. Feldstein, Martin, 1997. "The Political Economy of the European Economic and Monetary Union: Political," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 23-42, Fall. [Downloadable!] (restricted)
  2. J. Lopez-Cordova & Chris Meissner, 2000. "Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era," Center for International and Development Economics Research, Working Paper Series 1003, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
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  3. Andrew K. Rose, 2001. "Currency unions and trade: the effect is large," Economic Policy, CEPR, CES, MSH, vol. 16(33), pages 449-461, October. [Downloadable!] (restricted)
  4. Wyplosz, Charles, 1997. "EMU: Why and How It Might Happen," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 3-21, Fall. [Downloadable!] (restricted)
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  5. Rose, Andrew K, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," CEPR Discussion Papers 2329, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. 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. [Downloadable!] (restricted)
  7. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
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(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. Richard Baldwin Virginia Di Nino, 2006. "Euros and zeros: The common currency effect on trade in new goods," HEI Working Papers heiwp21-2006, Economics Section, The Graduate Institute of International Studies, revised 31 Oct 2006. [Downloadable!]
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  2. Michal Grajek, 2004. "Diffusion of ISO 9000 Standards and International Trade," CIG Working Papers SP II 2004-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
  3. Brian Ardy & Iain Begg & Waltraud Schelkle & Francisco Torres, 2002. "How will EMU affect cohesion?," Intereconomics: Review of European Economic Policy, Springer, vol. 37(6), pages 300-314, November. [Downloadable!] (restricted)
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  4. Vicarelli, Claudio & De Santis, Roberta & De Nardis, Sergio, 2008. "The Single Currency's Effects on Eurozone Sectoral Trade: Winners and Losers?," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(17), pages 1-34. [Downloadable!]
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