Advanced Search
MyIDEAS: Login to save this paper or follow this series

Stylized Factson Bilateral Trade and Currency Unions

Contents:

Author Info

  • Michal Hulej
  • Charalambos G. Tsangarides
  • Pierre Ewenczyk

Abstract

This paper explores and quantifies several aspects of the performance of currency unions using an augmented version of the gravity model and focusing on two samples, the world and Africa. Our empirical findings suggest that, in principle, membership in a currency union should benefit Africa as much as it does the rest of the world. In addition, we find evidence from both samples that the effect of currency unions on trade is large, almost a doubling; currency unions are associated with trade creation, increase price co-movements among members, and make trade more stable; and longer duration of currency union membership brings about more benefits, although with some diminishing returns.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18737
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/31.

as in new window
Length: 37
Date of creation: 01 Jan 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/31

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: Trade; Bilateral trade; Economic models; samples; equation; free trade; statistics; trade creation; trade diversion; logarithm; dummy variable; trade agreements; monetary union; terms of trade; regional trade; free trade agreements; world trade; sensitivity analysis; trade effects; monetary unions; free trade area; trade arrangements; asymmetric shocks; trade area; trade agreement; survey; international trade; trade flows; instrumental variable; instrumental variables; standard deviation; world trade organization; economic integration; trade patterns; trade shocks; trading partners; volume of trade; trade values; trade areas; terms of trade shocks; equations; increased trade; free trade areas; world economy; increasing integration; interest groups; trade volume; missing observations; cross section analysis; regional trade arrangements; trade theories; trade performance; free trade arrangements; confidence intervals; trading patterns; neighboring countries; importing countries; sample selection; transport costs; economic community; political decisions; global markets; estimation technique; free trade agreement; trade openness; regional trade agreements; exchange rate risk; perturbations; statistical significance; trade policies; exchange rate regimes; optimum currency areas; commodity prices; trade impact; estimation of equation; impact of trade; time series; correlation; increasing trade; dummy variables; econometrics; open economies; common market; low trade; value of trade; trade data; trade flow;

Other versions of this item:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Paul Collier & Jan Willem Gunning, 1997. "Explaining African economic performance," CSAE Working Paper Series 1997-02.2, Centre for the Study of African Economies, University of Oxford.
  2. Frankel, Jeffrey & Rose, Andrew K., 2001. "An Estimate of the Effect of Common Currencies on Trade and Income," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp01-013, Harvard University, John F. Kennedy School of Government.
  3. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
  4. Arvind Subramanian & Natalia T. Tamirisa, 2003. "Is Africa Integrated in the Global Economy?," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 2.
  5. Paul Masson & Catherine Pattillo, 2002. "Monetary Union in West Africa: An Agency of Restraint for Fiscal Policies?," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 11(3), pages 387-412, September.
  6. Alan V. Deardorff, 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Working Papers 5377, National Bureau of Economic Research, Inc.
  7. Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2003. "Optimal Currency Areas," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 2002, Volume 17, pages 301-356 National Bureau of Economic Research, Inc.
  8. Andrew K. Rose, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," NBER Working Papers 7432, National Bureau of Economic Research, Inc.
  9. Coe, David T & Hoffmaister, Alexander W, 1999. "North-South Trade: Is Africa Unusual?," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 8(2), pages 228-56, July.
  10. Andrew Rose, 2004. "A Meta-Analysis of the Effect of Common Currencies on International Trade," NBER Working Papers 10373, National Bureau of Economic Research, Inc.
  11. Alberto Alesina & Robert J. Barro, 2002. "Currency Unions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(2), pages 409-436, May.
  12. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, American Economic Association, vol. 91(5), pages 1369-1401, December.
  13. Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1473, C.E.P.R. Discussion Papers.
  14. Fielding, David & Shields, Kalvinder, 2001. "Modelling macroeconomic shocks in the CFA Franc Zone," Journal of Development Economics, Elsevier, Elsevier, vol. 66(1), pages 199-223, October.
  15. Xavier Debrun & Paul Masson & Catherine Pattillo, 2005. "Monetary union in West Africa: who might gain, who might lose, and why?," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 38(2), pages 454-481, May.
  16. Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, American Economic Association, vol. 91(2), pages 386-390, May.
  17. Fatás, Antonio & Rose, Andrew K, 2001. "Do Monetary Handcuffs Restrain Leviathan? Fiscal Policy in Extreme Exchange Rate Regimes," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2692, C.E.P.R. Discussion Papers.
  18. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
  19. Amemiya, Takeshi, 1984. "Tobit models: A survey," Journal of Econometrics, Elsevier, Elsevier, vol. 24(1-2), pages 3-61.
  20. Dani Rodrik, 1998. "Trade Policy and Economic Performance in Sub-Saharan Africa," NBER Working Papers 6562, National Bureau of Economic Research, Inc.
  21. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 34(2), pages 430-447, May.
  22. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Gilles Dufrenot & Valerie Mignon & Charalambos Tsangarides, 2010. "The trade-growth nexus in the developing countries: a quantile regression approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 146(4), pages 731-761, December.
  2. Mahvash Saeed Qureshi, 2008. "Africa's Oil Abundance and External Competitiveness," IMF Working Papers 08/172, International Monetary Fund.
  3. Qureshi, Mahvash Saeed, 2013. "Trade and thy neighbor's war," Journal of Development Economics, Elsevier, Elsevier, vol. 105(C), pages 178-195.
  4. Tomáš Havránek, 2010. "Rose effect and the euro: is the magic gone?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 146(2), pages 241-261, June.
  5. Cécile Couharde & Issiaka Coulibaly & David Guerreiro & Valérie Mignon, 2012. "Revisiting the theory of optimum currency areas: Is the CFA franc zone sustainable?," Working Papers 2012-13, CEPII research center.
  6. Qureshi, Mahvash Saeed & Tsangarides, Charalambos G., 2012. "Hard or Soft Pegs? Choice of Exchange Rate Regime and Trade in Africa," World Development, Elsevier, Elsevier, vol. 40(4), pages 667-680.
  7. Xavier Debrun & Catherine A. Pattillo & Paul R. Masson, 2010. "Should African Monetary Unions Be Expanded? An Empirical Investigation of the Scope for Monetary Integration in Sub-Saharan Africa," IMF Working Papers 10/157, International Monetary Fund.
  8. Christian Volpe Martincus & Jerónimo Carballo & Andrés Gallo, 2010. "The Impact of Export Promotion Institutions on Trade: Is It the Intensive or the Extensive Margin?," IDB Publications 36765, Inter-American Development Bank.
  9. Tomáš Havránek, 2009. "Rose Effect and the Euro: The Magic is Gone," Working Papers IES, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies 2009/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Aug 2009.
  10. Mahvash Saeed Qureshi & Charalambos G. Tsangarides, 2010. "The Empirics of Exchange Rate Regimes and Trade," IMF Working Papers 10/48, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:06/31. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.