Reconsidering the trade-creating effects of a currency union
This paper reconsiders recent empirical evidence found by Andrew Rose that countries adopting a common currency will triple their bilateral trade. The authors find that this large estimated effect is due to estimation bias arising from missing and/or misspecified time-variant factors rather than to the adoption of a common currency. The results of this study, obtained with a general specification of time-variant factors, indicate that a common currency actually leads to a small reduction in trade over a 5-year period, although this result is not statistically different from zero. The authors also find that over 10- and 20-year periods, trade volumes are more than halved by the adoption of a common currency.
Volume (Year): (2001)
Issue (Month): May ()
|Contact details of provider:|| Postal: |
Web page: http://www.stlouisfed.org/
More information through EDIRC
|Order Information:|| Web: http://www.stls.frb.org/research/order/pubform.html Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Agathe Cote, . "Exchange Rate Volatility and Trade: A Survey," Working Papers 94-5, Bank of Canada.
- Brada, Josef C & Mendez, Jose, 1988. "Exchange Rate Risk, Exchange Rate Regime and the Volume of International Trade," Kyklos, Wiley Blackwell, vol. 41(2), pages 263-80.
- Bayoumi, Tamim & Eichengreen, Barry, 1995.
"Is Regionalism Simply a Diversion? Evidence from the Evolution of the EC and EFTA,"
CEPR Discussion Papers
1294, C.E.P.R. Discussion Papers.
- Tamim Bayoumi & Barry Eichengreen, 1997. "Is Regionalism Simply a Diversion? Evidence from the Evolution of the EC and EFTA," NBER Chapters, in: Regionalism versus Multilateral Trade Arrangements, NBER-EASE Volume 6, pages 141-168 National Bureau of Economic Research, Inc.
- Tamim Bayoumi & Barry Eichengreen, 1995. "Is Regionalism Simply a Diversion? Evidence From the Evolution of the EC and EFTA," NBER Working Papers 5283, National Bureau of Economic Research, Inc.
- Tamim Bayoumi & Barry J. Eichengreen, 1995. "Is Regionalism Simply a Diversion? Evidence from the Evolution of the EC and EFTA," IMF Working Papers 95/109, International Monetary Fund.
- I-Hui Cheng & Howard J. Wall, 2005.
"Controlling for heterogeneity in gravity models of trade and integration,"
Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
- I-Hui Cheng & Howard J. Wall, 2004. "Controlling for heterogeneity in gravity models of trade and integration," Working Papers 1999-010, Federal Reserve Bank of St. Louis.
- Paul De Grauwe, 1988. "Exchange Rate Variability and the Slowdown in Growth of International Trade," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 63-84, March.
- Eric van Wincoop & Philippe Bacchetta, 2000.
"Does Exchange-Rate Stability Increase Trade and Welfare?,"
American Economic Review,
American Economic Association, vol. 90(5), pages 1093-1109, December.
- Philippe BACCHETTA & Eric VAN WINCOOP, 1999. "Does Exchange Rate Stability Increase Trade and Welfare ?," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9917, Université de Lausanne, Faculté des HEC, DEEP.
- Belanger, D. & Gutierrez, S. & Racette, D. & Raynauld, J., 1990.
"The Impact Of Exchange Rate Variability On Trade Flows: Further Results On Sectoral U.S. Imports From Canada,"
90-08, ECOLE DES HAUTES ETUDES COMMERCIALES (H.E.C.), MONTREAL-.
- Belanger, Denis & Gutierrez, Sylvia & Racette, Daniel & Raynauld, Jacques, 1992. "The impact of exchange rate variability on trade flows: Further results on sectoral U.S. imports from Canada," The North American Journal of Economics and Finance, Elsevier, vol. 3(1), pages 61-82.
When requesting a correction, please mention this item's handle: RePEc:fip:fedlrv:y:2001:i:may:p:37-46:n:v.83no.5. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.