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The Welfare Gains Of Trade Integration In The European Monetary Union

  • Auray, Stéphane
  • Eyquem, Aurélien
  • Poutineau, Jean-Christophe

This paper evaluates the welfare gains arising from a deeper trade integration in the European Monetary Union. To do this, the European Monetary Union is represented in a realistic way by an intertemporal general equilibrium model with incomplete financial markets, sticky prices and home bias both in private consumption and production. The model is estimated and globally not rejected by the data. Two main results emerge : (i) an increase in vertical (intermediate goods) trade implies welfare gains while (ii) an increase in horizontal trade implies welfare losses.

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Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 14 (2010)
Issue (Month): 05 (November)
Pages: 645-676

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Handle: RePEc:cup:macdyn:v:14:y:2010:i:05:p:645-676_99
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