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EMU and trade: A PPML re‐assessment with intra‐national trade flows

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  • Silviano Esteve‐Pérez
  • Salvador Gil‐Pareja
  • Rafael Llorca‐Vivero
  • José Antonio Martínez‐Serrano

Abstract

This paper examines the EMU effect on trade for the eleven early joiners and Greece relying for the first time on data that include both international and intra‐national trade flows, in line with all the microfoundations of the structural gravity model of trade. We find that the overall EMU impact on trade is positive between its members and, specially, for trade between members and non‐members. Interestingly, we further show that the effect of the EMU on bilateral trade remarkably differs across countries. For Ireland, Belgium–Luxembourg, Spain, Portugal and Austria, we find robust evidence that EMU has boosted trade both with other members and with third countries, while for Finland, France, Germany, Italy and the Netherlands, the results suggest that only trade with third countries has been enhanced by the EMU. Greece is the only country that shows a negative impact in trade with other EMU members and no effect in trade with non‐members. Finally, the results across countries according to the direction of the trade flows (exports versus imports) do not show significant differences in any case.

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  • Silviano Esteve‐Pérez & Salvador Gil‐Pareja & Rafael Llorca‐Vivero & José Antonio Martínez‐Serrano, 2020. "EMU and trade: A PPML re‐assessment with intra‐national trade flows," The World Economy, Wiley Blackwell, vol. 43(10), pages 2574-2599, October.
    • Handle: RePEc:bla:worlde:v:43:y:2020:i:10:p:2574-2599
    DOI: 10.1111/twec.12960
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    3. Silviano Esteve-Pérez & Salvador Gil-Pareja & Rafael Llorca-Vivero & Jordi Paniagua, 2021. "Has the Euro paid off? A study of the trade-induced welfare effects of the EMU," Working Papers 2103, Department of Applied Economics II, Universidad de Valencia.

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