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The nonlinear impact of currency unions on bilateral trade

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  • Katayama, Hajime
  • Melatos, Mark

Abstract

Most gravity model specifications assume that a currency union varies the level of bilateral trade between members by a constant proportion. We demonstrate that a common currency also alters the slope of the relationship between bilateral trade and member country GDPs.

Suggested Citation

  • Katayama, Hajime & Melatos, Mark, 2011. "The nonlinear impact of currency unions on bilateral trade," Economics Letters, Elsevier, vol. 112(1), pages 94-96, July.
    • Handle: RePEc:eee:ecolet:v:112:y:2011:i:1:p:94-96
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    References listed on IDEAS

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    1. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
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    6. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(30), pages 08-45.
    7. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 437-466.
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    Cited by:

    1. Mariam Camarero & Estrella Gómez-Herrera & Cecilio Tamarit, 2018. "New Evidence on Trade and FDI: how Large is the Euro Effect?," Open Economies Review, Springer, vol. 29(2), pages 451-467, April.
    2. Meher Manzur, 2018. "Exchange rate economics is always and everywhere controversial," Applied Economics, Taylor & Francis Journals, vol. 50(3), pages 216-232, January.
    3. Campbell, Douglas L., 2011. "Estimating the impact of currency unions on trade using a dynamic gravity framework," MPRA Paper 35531, University Library of Munich, Germany.
    4. Mignamissi, Dieudonné, 2020. "The CFA Franc effect on trade," MPRA Paper 99018, University Library of Munich, Germany.
    5. Divine Ngenyeh Kangami & Oluyele Akinkugbe, 2021. "Common Currency and Intra-Regional Trade in the Central African Monetary Community (CEMAC)," Journal of African Trade, Springer, vol. 8(1), pages 13-22, December.
    6. Pierluigi Montalbano & Silvia Nenci & Laura Dell'Agostino, 2019. "A non-parametric re-assessment of the trade effects of the euro using value added data," Working Papers 9/19, Sapienza University of Rome, DISS.
    7. Yutaka Kurihara, 2017. "The Impact of ‘Brexit’ on Japanese International Trade in EU," Business, Management and Economics Research, Academic Research Publishing Group, vol. 3(6), pages 57-61, 06-2017.
    8. Campbell, Douglas L., 2011. "Estimating the impact of currency unions on trade using a dynamic gravity framework," MPRA Paper 35531, University Library of Munich, Germany.

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