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A Meta-Analysis of the Effect of Common Currencies on International Trade

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  • Andrew Rose

Abstract

Thirty-four recent studies have investigated the effect of currency union on trade, resulting in 754 point estimates of the effect. This paper is a quantitative attempt to summarize the current state of debate; meta-analysis is used to combine the disparate estimates. The chief findings are that: a) the hypothesis that there is no effect of currency union on trade can be rejected at standard significance levels; b) the combined estimate implies that a bilateral currency union increase trade by between 30% and 90%; and c) the estimates are heterogeneous and not consistently tied to most features of the studies.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10373.

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Date of creation: Mar 2004
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Publication status: published as Rose, Andrew and T. D. Stanley. "A Meta-Analysis Of The Effect Of Common Currencies On International Trade," Journal of Economic Surveys, 2005, v19(3,Jul), 347-365.
Handle: RePEc:nbr:nberwo:10373

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  1. Andrew K. Rose, 2002. "Do We Really KNow that the WTO Increases Trade?," Working Papers 182002, Hong Kong Institute for Monetary Research.
  2. Andrew K. Rose, 2001. "Currency unions and trade: the effect is large," Economic Policy, CEPR & CES & MSH, vol. 16(33), pages 449-461, October.
  3. Klein, Michael W., 2005. "Dollarization and trade," Journal of International Money and Finance, Elsevier, vol. 24(6), pages 935-943, October.
  4. Mathilde Maurel & Marc Flandreau, 2001. "Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe: Just Do It," Sciences Po publications n°3087, Sciences Po.
  5. Ritschl, Albrecht & Wolf, Nikolaus, 2003. "Endogeneity of Currency Areas and Trade Blocs: Evidence from the Inter-war Period," CEPR Discussion Papers 4112, C.E.P.R. Discussion Papers.
  6. 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.
  7. Andrew K. Rose & Charles Engel, 2000. "Currency Unions and International Integration," NBER Working Papers 7872, National Bureau of Economic Research, Inc.
  8. 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.
  9. Shang-Jin Wei & Arvind Subramanian, 2003. "The WTO Promotes Trade, Strongly But Unevenly," IMF Working Papers 03/185, International Monetary Fund.
  10. repec:dgr:uvatin:2002108 is not listed on IDEAS
  11. Fidrmuc, Jan & Fidrmuc, Jarko, 2000. "Disintegration and Trade," CEPR Discussion Papers 2641, C.E.P.R. Discussion Papers.
  12. Jacques Melitz, 2003. "Language and Foreign Trade," Working Papers 2003-26, Centre de Recherche en Economie et Statistique.
  13. Sergio Nardis, 2004. "Currency unions and trade: The special case of EMU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(3), pages 625-649, September.
  14. Alejandro Micco & Ernesto H. Stein & Guillermo Luis Ordoñez, 2003. "The Currency Union Effect on Trade: Early Evidence from EMU," Research Department Publications 4339, Inter-American Development Bank, Research Department.
  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. Dr Peter Kenen, 2002. "Currency Unions and Trade: Variations on Themes by Rose and Persson," Reserve Bank of New Zealand Discussion Paper Series DP2002/08, Reserve Bank of New Zealand.
  17. T. D. Stanley, 2001. "Wheat from Chaff: Meta-analysis as Quantitative Literature Review," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 131-150, Summer.
  18. Marc Flandreau & Mathilde Maurel, 2005. "Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe," Open Economies Review, Springer, vol. 16(2), pages 135-152, April.
  19. Christie Smith, 2002. "Currency unions and gravity models revisited," Reserve Bank of New Zealand Discussion Paper Series DP2002/07, Reserve Bank of New Zealand.
  20. Frankel, Jeffrey A & Rose, Andrew K, 2000. "An Estimate of the Effect of Currency Unions on Trade and Output," CEPR Discussion Papers 2631, C.E.P.R. Discussion Papers.
  21. repec:spo:wpecon:info:hdl:2441/607 is not listed on IDEAS
  22. 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.
  23. Sergio Nardis & Claudio Vicarelli, 2003. "Currency unions and trade: The special case of EMU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 139(4), pages 625-649, December.
  24. Maurice J.G. Bun & Franc J.G.M. Klaassen, 2002. "Has the Euro increased Trade?," Tinbergen Institute Discussion Papers 02-108/2, Tinbergen Institute.
  25. Yeyati, Eduardo Levy, 2003. "On the impact of a common currency on bilateral trade," Economics Letters, Elsevier, vol. 79(1), pages 125-129, April.
  26. Mélitz, Jacques, 2001. "Geography, Trade and Currency Union," CEPR Discussion Papers 2987, C.E.P.R. Discussion Papers.
  27. 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.
  28. repec:rus:hseeco:123558 is not listed on IDEAS
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