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

  • Andrew K. Rose
  • T. D. Stanley

Thirty-four recent studies have investigated the effect of currency union on trade, resulting in 754 point estimates of this effect. This paper uses meta-analysis to combine, explain, and to summarize these disparate estimates of common currency trade effects. The hypothesis that there is no effect of currency union on trade is easily and robustly rejected at standard significance levels. Combining these estimates implies that a currency union increases bilateral trade by between 30 and 90%. Although there is evidence of publication selection, there is also evidence of a genuine positive trade effect beyond publication bias. Copyright Blackwell Publishers Ltd, 2005.

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Article provided by Wiley Blackwell in its journal Journal of Economic Surveys.

Volume (Year): 19 (2005)
Issue (Month): 3 (07)
Pages: 347-365

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Handle: RePEc:bla:jecsur:v:19:y:2005:i:3:p:347-365
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References listed on IDEAS
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  1. 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.
  2. Christopher M. Meissner, 2003. "Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era," American Economic Review, American Economic Association, vol. 93(1), pages 344-353, March.
  3. Engel, Charles M & Rose, Andrew K, 2001. "Currency Unions and International Integration," CEPR Discussion Papers 2659, C.E.P.R. Discussion Papers.
  4. Subramanian, Arvind & Wei, Shang-Jin, 2005. "The WTO Promotes Trade, Strongly But Unevenly," CEPR Discussion Papers 5122, C.E.P.R. Discussion Papers.
  5. Maurice J.G. Bun & Franc J.G.M. Klaassen, 2002. "Has the Euro increased Trade?," Tinbergen Institute Discussion Papers 02-108/2, Tinbergen Institute.
  6. Wolf, Nikolaus & Ritschl, Albrecht, 2003. "Endogeneity of Currency Areas and Trade Blocs: Evidence from the Inter-War Period," Papers 2004,10, Humboldt-Universität Berlin, Center for Applied Statistics and Economics (CASE).
  7. Jarko Fidrmuc & Jan Fidrmuc, 2000. "Disintegration and Trade," William Davidson Institute Working Papers Series 353, William Davidson Institute at the University of Michigan.
  8. Jacques Melitz, 2003. "Geography, Trade and Currency Union," Working Papers 2003-25, Centre de Recherche en Economie et Statistique.
  9. 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.
  10. Andrew K. Rose, 2002. "Do We Really KNow that the WTO Increases Trade?," Working Papers 182002, Hong Kong Institute for Monetary Research.
  11. 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.
  12. Michael W. Klein, 2002. "Dollarization and Trade," NBER Working Papers 8879, National Bureau of Economic Research, Inc.
  13. Alejandro Micco & Ernesto H. Stein & Guillermo Luis Ordoñez, 2003. "The Currency Union Effect on Trade: Early Evidence from EMU," IDB Publications (Working Papers) 6511, Inter-American Development Bank.
  14. Yeyati, Eduardo Levy, 2003. "On the impact of a common currency on bilateral trade," Economics Letters, Elsevier, vol. 79(1), pages 125-129, April.
  15. Melitz, Jacques, 2008. "Language and foreign trade," European Economic Review, Elsevier, vol. 52(4), pages 667-699, May.
  16. repec:spo:wpecon:info:hdl:2441/607 is not listed on IDEAS
  17. 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.
  18. repec:rus:hseeco:123558 is not listed on IDEAS
  19. 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.
  20. Andrew K. Rose, 2001. "Currency unions and trade: the effect is large," Economic Policy, CEPR;CES;MSH, vol. 16(33), pages 449-461, October.
  21. Maurice J.G. Bun & Franc J.G.M. Klaassen, 2002. "Has the Euro increased Trade?," Tinbergen Institute Discussion Papers 02-108/2, Tinbergen Institute.
  22. Flandreau, Marc & Maurel, Mathilde, 2001. "Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe: Just Do It," CEPR Discussion Papers 3087, C.E.P.R. Discussion Papers.
  23. 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.
  24. 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.
  25. 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.
  26. 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.
  27. 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.
  28. Christie Smith, 2002. "Currency unions and gravity models revisited," Reserve Bank of New Zealand Discussion Paper Series DP2002/07, Reserve Bank of New Zealand.
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