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The currency union effect on trade is decreasing over time

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  • De Sousa, Jose

Abstract

Estimating a theoretical gravity model over a sixty-year period, from 1948 to 2009, I found an unexpected trend: the currency union impact on trade is decreasing over time. This result suggests that with trade and financial globalization currency unions become less and less important to promote trade.

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File URL: http://mpra.ub.uni-muenchen.de/40327/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35448.

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Date of creation: Nov 2011
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Handle: RePEc:pra:mprapa:35448

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Keywords: Currency; Unions; Dollarization; Trade; Gravity; Poisson;

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References

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  1. Yeyati, Eduardo Levy, 2003. "On the impact of a common currency on bilateral trade," Economics Letters, Elsevier, vol. 79(1), pages 125-129, April.
  2. J. M. C. Santos Silva & Silvana Tenreyro, 2009. "Further Simulation Evidence on the Performance of the Poisson Pseudo-Maximum Likelihood Estimator," CEP Discussion Papers dp0933, Centre for Economic Performance, LSE.
  3. Reuven Glick & Andrew K. Rose, 2001. "Does a currency union affect trade? the time series evidence," Working Paper Series 2001-13, Federal Reserve Bank of San Francisco.
  4. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
  5. 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.
  6. J.M.C. Santos Silva & Silvana Tenreyro, 2010. "Currency Unions in Prospect and Retrospect," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 51-74, 09.
  7. Anne-Célia Disdier & Keith Head, 2004. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," Development Working Papers 186, Centro Studi Luca d\'Agliano, University of Milano.
  8. Yotov, Yoto, 2012. "A Simple Solution to the Distance Puzzle in International Trade," School of Economics Working Paper Series 2012-6, LeBow College of Business, Drexel University.
  9. Andrew K. Rose, 2001. "Currency unions and trade: the effect is large," Economic Policy, CEPR & CES & MSH, vol. 16(33), pages 449-461, October.
  10. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
  11. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  12. Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics 3744, London School of Economics and Political Science, LSE Library.
  13. Keith Head & John Ries & Thierry Mayer, 2008. "The erosion of colonial trade linkages after independence," Sciences Po publications 6951, Sciences Po.
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Cited by:
  1. Arvis, Jean-François & Duval, Yann & Shepherd, Ben & Utoktham,Chorthip, 2013. "Trade costs in the developing world : 1995 - 2010," Policy Research Working Paper Series 6309, The World Bank.
  2. Baghdadi, Leila & Martinez-Zarzoso, Inmaculada & Zitouna, Habib, 2013. "Are RTA agreements with environmental provisions reducing emissions?," Journal of International Economics, Elsevier, vol. 90(2), pages 378-390.
  3. Douglas L. Campbell, 2013. "Estimating the Impact of Currency Unions on Trade: Solving the Glick and Rose Puzzle," The World Economy, Wiley Blackwell, vol. 36(10), pages 1278-1293, October.
  4. Yotov, Yoto V., 2012. "A simple solution to the distance puzzle in international trade," Economics Letters, Elsevier, vol. 117(3), pages 794-798.
  5. Dorn, Sabrina & Egger, Peter H., 2013. "Fixed currency regimes and the time pattern of trade effects," Economics Letters, Elsevier, vol. 119(2), pages 120-123.
  6. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Stephan Klasen & Florian Johannsen, 2013. "Does German Development Aid Promote German Exports and German Employment? A Sectoral-Level Analysis," Ibero America Institute for Econ. Research (IAI) Discussion Papers 227, Ibero-America Institute for Economic Research, revised 18 Dec 2013.

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