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The Effect of a Common Currency on Trade - Ireland before and after the Sterling Link

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Author Info

  • Rodney Thom

    (University College Dublin)

  • Brendan Walsh

    (University College Dublin)

Abstract

This paper uses the introduction of an exchange rate between Ireland and the UK in 1979 as a natural experiment to shed light on the effects of a common currency on the volume of international trade. No evidence is found from time series or panel regressions that the change of exchange rate regime had a significant effect on the pattern of Irish trade. This finding casts doubt on the belief that the European Economic and Monetary Union will have a major effect on the pattern of trade between participating countries.

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File URL: http://www.ucd.ie/economics/research/papers/2001/WP01.10.pdf
File Function: First version, 2001
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200110.

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Length: 32 pages
Date of creation: 11 May 2001
Date of revision:
Handle: RePEc:ucn:wpaper:200110

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Web page: http://www.ucd.ie/economics
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  1. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  2. Edgar Morgenroth, 2000. "Exchange rates and trade: the case of Irish exports to Britain," Applied Economics, Taylor & Francis Journals, vol. 32(1), pages 107-110.
  3. 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.
  4. Robert C. Feenstra & Robert E. Lipsey & Harry P. Bowen, 1997. "World Trade Flows, 1970-1992, with Production and Tariff Data," NBER Working Papers 5910, National Bureau of Economic Research, Inc.
  5. Neary, J.P. & Thom, D.R., 1996. "Punts, Pounds and Euros: In Search of an Optimum Currency Area," Papers 96/24, College Dublin, Department of Political Economy-.
  6. Marc Flandreau, 2001. "The Bank, the States, and the Market: an Austro-Hungarian Tale for Euroland, 1867-1914," Sciences Po publications n°43, Sciences Po.
  7. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  8. Cotter, John, 2000. "Volatility and the Euro: an Irish perspective," MPRA Paper 3535, University Library of Munich, Germany.
  9. 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.
  10. Lothian, James R. & Taylor, Mark P., 1997. "Real exchange rate behavior," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 945-954, December.
  11. Giovanni Dell'Ariccia, 1999. "Exchange Rate Fluctuations and Trade Flows: Evidence from the European Union," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 5.
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Citations

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Cited by:
  1. Glick, Reuven & Rose, Andrew K., 2002. "Does a currency union affect trade? The time-series evidence," European Economic Review, Elsevier, vol. 46(6), pages 1125-1151, June.
  2. 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.
  3. Don Bredin & John Cotter, 2011. "Volatility and Irish Exports," Working Papers 200416, Geary Institute, University College Dublin.
  4. Baldwin, Richard E. & Skudelny, Frauke & Taglioni, Daria, 2005. "Trade effects of the euro: evidence from sectoral data," Working Paper Series 0446, European Central Bank.
  5. Jeffrey A. Frankel, 2008. "The Estimated Effects of the Euro on Trade: Why Are They Below Historical Effects of Monetary Unions Among Smaller Countries?," NBER Working Papers 14542, National Bureau of Economic Research, Inc.
  6. Ruhul Salim & Shahriar Kabir, 2010. "The Immediate Impact Of Euro On Intra-Regional Trade: An Event Study Approach," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 35(3), pages 43-55, September.
  7. Cipollina, Maria & Salvatici, Luca, 2006. "Reciprocal Trade Agreements in Gravity Models: A Meta-analysis," Working Papers 18877, TRADEAG - Agricultural Trade Agreements.
  8. Klein, Michael W., 2005. "Dollarization and trade," Journal of International Money and Finance, Elsevier, vol. 24(6), pages 935-943, October.
  9. María Santana-Gallego & Francisco J. Ledesma-Rodríguez & Jorge V. Pérez-Rodríguez, 2007. "On the impact of exchange rate regimes on tourism," Working Papers 07-07, Asociación Española de Economía y Finanzas Internacionales.
  10. Baldwin, Richard E., 2006. "The euro’s trade effects," Working Paper Series 0594, European Central Bank.

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