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Investigating the Effects of Euro on Bilateral Trade: a Kernel Matching Approach


  • Fotopoulos, Georgios

    () (University of Peloponnese)

  • Psallidas, Dionysios

    () (University of Patras)


The aim of this paper is to estimate the effects of the adoption of the Euro on the bilateral trade of European and OECD countries. Using the most recently available data and a more appropriate deflator of bilateral trade, this research tries to assess whether EMU countries trade more than they would have if they had not adopted the Euro. In doing so an augmented ‘difference in differences’ approach is used. The results obtained show that the adoption of the Euro increased trade significantly and that there is also no evidence of trade diversion effects.

Suggested Citation

  • Fotopoulos, Georgios & Psallidas, Dionysios, 2009. "Investigating the Effects of Euro on Bilateral Trade: a Kernel Matching Approach," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 24, pages 661-684.
  • Handle: RePEc:ris:integr:0489

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    More about this item


    European Union; common currency; difference-in-differences estimation; trade creation; kernel matching;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions


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