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Trade Effects of Monetary Integration in Large, Mature Economies: A Primer on the European Monetary Union

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  • Lúcio Vinhas de Souza

Abstract

The aim of this paper is to estimate the trade gains arising from the constitution of a currency union for a set of economically large, developed nations who create a monetary union as a deliberate economic policy action: namely, for the members of the euro area. With a 1980-2001 sample, no consistent significant trade effects from the 1999 creation of EMU are found, using dummies for the 1999-2001 period. Treating EMU not as a single event but as a part of a long-term integration process, and representing it by a series of continuous cross-country interest differentials, the evidence seems to be stronger, but it does not seem to be conditional on any single, specific exchange rate arrangement.

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File URL: https://www.ifw-members.ifw-kiel.de/publications/trade-effects-of-monetary-integration-in-large-mature-economies-a-primer-on-the-european-monetary-union/kap1137.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1137.

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Length: 23 pages
Date of creation: Dec 2002
Date of revision:
Handle: RePEc:kie:kieliw:1137

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Related research

Keywords: Currency Unions; EU; EMU; panel model; gravity equation;

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References

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  1. Silvana Tenreyro & Robert J. Barro, 2003. "Economic Effects of Currency Unions," NBER Working Papers 9435, National Bureau of Economic Research, Inc.
  2. 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, vol. 91(2), pages 386-390, May.
  3. Alberto Alesina & Robert Barro & Silvana Tenreyro, 2002. "Optimal Currency Areas," Harvard Institute of Economic Research Working Papers 1958, Harvard - Institute of Economic Research.
    • Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2003. "Optimal Currency Areas," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 301-356 National Bureau of Economic Research, Inc.
  4. Peter Egger, . "A Note on the Proper Econometric Specification of the Gravity Equation," WIFO Working Papers 108, WIFO.
  5. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  6. Sapir, André & Sekkat, M. Khalid, 1993. "Exchange Rate Regimes and Trade Prices: Does the EMS Matter?," CEPR Discussion Papers 810, C.E.P.R. Discussion Papers.
  7. J. Ernesto L�pez-C�rdova and Chris Meissner., 2000. "Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era," Center for International and Development Economics Research (CIDER) Working Papers C00-118, University of California at Berkeley.
  8. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  9. Fidrmuc, Jarko, 2001. "The Endogeneity of optimum currency area criteria, intraindustry trade and EMU enlargement," BOFIT Discussion Papers 8/2001, Bank of Finland, Institute for Economies in Transition.
  10. Jarko Fidrmuc, 2004. "The Endogeneity of the Optimum Currency Area Criteria, Intra-industry Trade, and EMU Enlargement," Contemporary Economic Policy, Western Economic Association International, vol. 22(1), pages 1-12, 01.
  11. Baer, Werner & Cavalcanti, Tiago & Silva, Peri, 2002. "Economic integration without policy coordination: the case of Mercosur," Emerging Markets Review, Elsevier, vol. 3(3), pages 269-291, September.
  12. Graham Bird & Ramkishen Rajan, 2002. "The Evolving Asian Financial Architecture," Centre for International Economic Studies Working Papers 2002-03, University of Adelaide, Centre for International Economic Studies.
  13. repec:fth:eeccco:127 is not listed on IDEAS
  14. Michael R. Pakko & Howard J. Wall, 2001. "Reconsidering the trade-creating effects of a currency union," Review, Federal Reserve Bank of St. Louis, issue May, pages 37-46.
  15. 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.
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Citations

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Cited by:
  1. Schweickert, Rainer & Thiele, Rainer, 2004. "From Washington to post-Washington? Consensus policies and divergent developments in Latin America and Asia," Kiel Discussion Papers 408, Kiel Institute for the World Economy (IfW).
  2. Felix Chan & Tommaso Mancini-Griffoli & Laurent L. Pauwels, 2008. "Stability Tests for Heterogeneous Panel Data," Working Papers 092008, Hong Kong Institute for Monetary Research.
  3. 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.

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