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Currency unions and trade: how large is the treatment effect?


  • Torsten Persson


The impact of a common currency on trade can be grossly mismeasured if countries that belong to currency unions are systematically different from those that do not, and if the relationship between trade and its observable determinants is complex. I argue that such complications are plausible and likely to distort the empirical results of a recent Economic Policy paper by Andrew Rose (Issue 30, 2000: pp. 7-45). Using techniques designed to be robust in this situation, I find that the effects of common currency on international trade are considerably less dramatic and much less precisely estimated. Copyright CEPR, CES, MSH, 2001.

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  • 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.
  • Handle: RePEc:bla:ecpoli:v:16:y:2001:i:33:p:433-462

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    References listed on IDEAS

    1. Michael Mussa, 1999. "Reforming the International Financial Architecture: Limiting Moral Hazard and Containing Real Hazard," RBA Annual Conference Volume,in: David Gruen & Luke Gower (ed.), Capital Flows and the International Financial System Reserve Bank of Australia.
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