This paper studies the effect on Anglo-Irish trade breaking the link between the Irish pound and sterling in 1979. A gravity model is used to explore this issue. No evidence is found of a structural break following the dismantling of the currency union. Nor did the resultant exchange rate volatility have a significant adverse effect on trade. These results do not support the belief that currency unions result in increased trade flows, either directly or by reducing exchange rate volatility.
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Paper provided by College Dublin, Department of Political Economy- in its series Papers with number
00/06.
Length: 18 pages Date of creation: 2000 Date of revision: Handle: RePEc:fth:dublec:00/06
Contact details of provider: Postal: Ireland; University College Dublin, Department of Political Economy, Centre for Economic Research, Belfield, Dublin 4 Phone: +353-1-7067777 Fax: +353-1-283 0068 Web page: http://www.ucd.ie/economics/ More information through EDIRC
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Find related papers by JEL classification: F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions F31 - International Economics - - International Finance - - - Foreign Exchange