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Measuring the Trade Effects of EMU

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Author Info
Hamid Faruqee

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Abstract

This paper examines the impact of European Economic and Monetary Union (EMU) on trade within the euro area. Using panel data for 22 industrial countries, the analysis estimates the effect of the euro's arrival on area-wide trade compared to bilateral trade flows between other industrial countries. Controlling for other influences according to the "gravity" model of trade, the panel analysis employs cointegration techniques to obtain reliable point estimates of EMU trade effects. Cross-country differences with respect to EMU trade gains and underlying factors accounting for these differences are also further explored.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/154.

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Length: 28 pages
Date of creation: 27 Aug 2004
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Handle: RePEc:imf:imfwpa:04/154

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Keywords: Trade European Economic and Monetary Union Bilateral trade Euro area

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This paper has been announced in the following NEP Reports: 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.:
  1. Lionel Fontagné & Michael Freudenberg, 1999. "Endogenous Symmetry of Shocks in a Monetary Union," Open Economies Review, Springer, vol. 10(3), pages 263-287, July. [Downloadable!] (restricted)
  2. Alejandro Micco & Ernesto Stein & Guillermo OrdoÒez, 2003. "The currency union effect on trade: early evidence from EMU," Economic Policy, CEPR, CES, MSH, vol. 18(37), pages 315-356, October. [Downloadable!] (restricted)
  3. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier. [Downloadable!] (restricted)
  4. Faruqee, Hamid, 1996. "Real exchange rates and the pattern of trade: comparative dynamics for north and south," Journal of International Money and Finance, Elsevier, vol. 15(2), pages 313-336, April. [Downloadable!] (restricted)
  5. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Is EMU more justifiable ex post than ex ante?," European Economic Review, Elsevier, vol. 41(3-5), pages 753-760, April. [Downloadable!] (restricted)
  6. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August. [Downloadable!] (restricted)
  7. 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)
  8. McKenzie, Michael D, 1999. " The Impact of Exchange Rate Volatility on International Trade Flows," Journal of Economic Surveys, Blackwell Publishing, vol. 13(1), pages 71-106, February. [Downloadable!] (restricted)
  9. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March. [Downloadable!] (restricted)
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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 & Roberta De Santis & Claudio Vicarelli, 2008. "The Euro's Effects on Trade in a Dynamic Setting," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 5(1), pages 73 - End , June. [Downloadable!]
    Other versions:
  2. Balogun, Emmanuel Dele, 2007. "Exchange rate policy and export performance of WAMZ countries," MPRA Paper 6233, University Library of Munich, Germany. [Downloadable!]
  3. José M. Campa & Linda S. Goldberg & José M. González-Mínguez, 2005. "Exchange rate pass through to import prices in the euro area," Banco de España Working Papers 0538, Banco de España. [Downloadable!]
    Other versions:
  4. Jarko Fidrmuc, 2005. "Austria's EU Accession and Trade," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 170-177, August. [Downloadable!]
  5. Alistair Dieppe & Thomas Warmedinger, 2007. "Modelling intra- and extra-area trade substitution and exchange rate pass-through in the euro area," Working Paper Series 760, European Central Bank. [Downloadable!]
  6. Kanda Naknoi & Michael Kumhof & Douglas Laxton, 2005. "On the Benefits of Exchange Rate Flexibility under Endogenous Tradedness of Goods," Computing in Economics and Finance 2005 405, Society for Computational Economics. [Downloadable!]
  7. THORBECKE, Willem, 2008. "The Effect of Exchange Rate Volatility on Fragmentation in East Asia: Evidence from the Electronics Industry," Discussion papers 08016, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  8. Richard Pomfret, 2005. "Sequencing Trade and Monetary Integration," Others 0502004, EconWPA. [Downloadable!]
  9. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2005. "Trade integration of Central and Eastern European countries - lessons from a gravity model," Working Paper Series 545, European Central Bank. [Downloadable!]
    Other versions:
  10. Sergio de Nardis & Roberta De Santis & Claudio Vicarelli, 2007. "The single currency’s effects on Eurozone sectoral trade: winners and losers?," ISAE Working Papers 88, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
    Other versions:
  11. Matthieu Bussière & Bernd Schnatz, 2006. "Evaluating China’s integration in world trade with a gravity model based benchmark," Working Paper Series 693, European Central Bank. [Downloadable!]
  12. Gabriel Moser & Wolfgang Pointner & Gerhard Reitschuler, 2004. "Economic Growth in Denmark, Sweden and the United Kingdom since the Start of Monetary Union," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 53-66, December. [Downloadable!]
  13. Helge Berger & Volker Nitsch, 2005. "Zooming Out: The Trade Effect of the Euro in Historical Perspective," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  14. Christine Dwane & Philip R. Lane & Tara McIndoe, 2007. "Currency Unions and Irish External Trade," The Institute for International Integration Studies Discussion Paper Series iiisdp189, IIIS. [Downloadable!]
  15. Balogun, Emmanuel Dele, 2007. "Effects of exchange rate policy on bilateral export trade of WAMZ countries," MPRA Paper 6234, University Library of Munich, Germany. [Downloadable!]
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