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Enlarging the EMU to the East: What Effects on Trade?

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  • Belke, Ansgar

    ()
    (University of Duisburg-Essen)

  • Spies, Julia

    ()
    (Institut für Angewandte Wirtschaftsforschung (IAW))

Abstract

The purpose of this paper is to assess the implications of the Economic and Monetary Union (EMU) accession of eight Central and Eastern European Countries (CEECs) on their share in EMU-12 imports. Overcoming biases related to endogeneity, omitted variables and sample selection, our results indicate that the common currency has boosted intra-EMU imports by 7%. Under the assumption that the same relationship between the explanatory variables and imports will hold for EMU-CEEC trade, we are able to predict the future impact of the Euro. Our findings suggest that except for the least integrated countries, Poland, Latvia and Lithuania, all CEECs can expect increases in the EMU-12 import share.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3647.

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Length: 44 pages
Date of creation: Aug 2008
Date of revision:
Publication status: published in: Empirica, 2008, 35 (4), 369-389
Handle: RePEc:iza:izadps:dp3647

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Keywords: Euro area enlargement; Central and Eastern European countries; gravity model; panel estimation;

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References

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  1. 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.
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  8. Jelle Brouwer & Richard Paap & Jean-Marie Viaene, 2007. "The Trade and FDI Effects of EMU Enlargement," CESifo Working Paper Series 2123, CESifo Group Munich.
  9. Richard Baldwin Virginia Di Nino, 2006. "Euros and zeros: The common currency effect on trade in new goods," IHEID Working Papers 21-2006, Economics Section, The Graduate Institute of International Studies, revised 31 Oct 2006.
  10. Bayoumi, Tamim & Eichengreen, Barry, 1992. "Shocking Aspects of Monetary Unification," Department of Economics, Working Paper Series qt791143kp, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  11. Breuss, Fritz & Fink, Gerhard & Haiss, Peter, 2004. "How well prepared are the New Member States for the European Monetary Union?," Journal of Policy Modeling, Elsevier, vol. 26(7), pages 769-791, October.
  12. 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.
  13. Maryla Maliszewska, 2004. "New Member States' Trading Potential Following EMU Accession: A Gravity Approach," CASE Network Studies and Analyses 0286, CASE-Center for Social and Economic Research.
  14. Berger, Helge & Nitsch, Volker, 2008. "Zooming out: The trade effect of the euro in historical perspective," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1244-1260, December.
  15. Flam, Harry & Nordström, Håkan, 2006. "Trade Volume Effects of the Euro: Aggregate and Sector Estimates," Seminar Papers 746, Stockholm University, Institute for International Economic Studies.
  16. Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2003. "Exchange Rate Regimes: Choices and Consequences," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072408, December.
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Citations

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Cited by:
  1. Timo Mitze, 2009. "Endogeneity in Panel Data Models with Time-Varying and Time-Fixed Regressors: To IV or not IV?," Ruhr Economic Papers 0083, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Timo Mitze & Björn Alecke & Gerhard Untiedt, 2009. "Trade-FDI Linkages in a System of Gravity Equations for German Regional Data," Ruhr Economic Papers 0084, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Ansgar Belke & Ingo Bordon & Inna Melnykovska & Rainer Schweickert, 2009. "Prospective NATO or EU Membership and Institutional Change in Transition Countries," Ruhr Economic Papers 0131, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Andrzej Cieslik, Jan Jakub Michalek, Jerzy Mycielski, 2012. "Euro and Trade Flows in Central Europe," Equilibrium, Uniwersytet Mikolaja Kopernika, vol. 7, pages 7-25.
  5. Mihai Rebiga, 2010. "Is Romania Ready for Adopting Euro?," Studies and Scientific Researches. Economics Edition, "Vasile Alecsandri" University of Bacau, Faculty of Economic Sciences, issue 15.
  6. Breusch, Trevor & Ward, Michael B & Nguyen, Hoa & Kompas, Tom, 2010. "On the fixed-effects vector decomposition," MPRA Paper 21452, University Library of Munich, Germany.
  7. Mitze, Timo, 2010. "Estimating Gravity Models of International Trade with Correlated Time-Fixed Regressors: To IV or not IV?," MPRA Paper 23540, University Library of Munich, Germany.
  8. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2008. "EU Enlargement and Trade Integration: Lessons from a Gravity Model," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 562-576, 08.
  9. Andrzej Cieslik, Jan Michalek, Anna Michalek, 2013. "The Impact of the Common Currency on Exports of New EMU Members: Firm-level Evidence for Slovenia and Slovakia," Equilibrium, Uniwersytet Mikolaja Kopernika, vol. 8, pages 7-23.
  10. Ansgar Belke & Ingo Bordon & Inna Melnykovska & Rainer Schweickert, 2009. "Prospective Membership and Institutional Change in Transition Countries," Kiel Working Papers 1562, Kiel Institute for the World Economy.
  11. Mitze, Timo & Alecke, Björn & Untiedt, Gerhard, 2008. "Trade, FDI and Cross-Variable Linkages: A German (Macro-)Regional Perspective," MPRA Paper 12245, University Library of Munich, Germany.
  12. Fritz Breuss, 2009. "An evaluation of the EU's Fifth Enlargement With special focus on Bulgaria and Romania," European Economy - Economic Papers 361, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  13. Estrella Gómez & Juliette Milgram Baleix, 2012. "EMU impact of on third countries’ exports. A gravity approach," ThE Papers 10/26, Department of Economic Theory and Economic History of the University of Granada..
  14. Fritz Breuss, 2007. "A Prototype Model of EU's 2007 Enlargement," FIW Working Paper series 007, FIW.
  15. Jungmittag, Andre, 2014. "Der Trade-off zwischen deutschen Direktinvestitionen und Exporten: Wie wichtig sind die verschiedenen Dimensionen der Distanz?," Working Paper Series: Business and Law 04, Frankfurt University of Applied Sciences, Faculty of Business and Law.
  16. Zaenal Mutaqin & Masaru Ichihashi, 2013. "Widening and Deepening Economic Integration Impact on Bilateral Trade in the Eurozone and ASEAN," IDEC DP2 Series 3-3, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).

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