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Breaking Badly: The Currency Union Effect on Trade

Author

Listed:
  • Douglas L. Campbell

    (New Economic School)

  • Aleksandr Chentsov

    (New Economic School)

Abstract

As several European countries debate entering, or exiting, the euro, a key policy question is how much currency unions (CUs) affect trade. Recently, Glick and Rose (2016) estimated that CUs increase trade on average by 100%, and that the euro has increased trade by 50%. In this paper, we find that other major geopolitical events correlated with CU switches drive the large estimated impact of CUs on trade. We find that these estimates are sensitive to intuitive controls and to dynamic specifications. Overall, we estimate that the impact of CUs on trade is often indistinct from zero, depending on the specification and controls.

Suggested Citation

  • Douglas L. Campbell & Aleksandr Chentsov, 2020. "Breaking Badly: The Currency Union Effect on Trade," Working Papers w0265, New Economic School (NES).
    • Handle: RePEc:abo:neswpt:w0265
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    File URL: https://www.nes.ru/files/Preprints-resh/WP265.pdf
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    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Saga Continues: A New Addition to the Currency Unions and Trade Literature
      by Doug Campbell in Douglas L. Campbell on 2017-07-30 18:35:00

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    Cited by:

    1. Santana-Gallego, Maria & Pérez-Rodríguez, Jorge V., 2019. "International trade, exchange rate regimes, and financial crises," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 85-95.
    2. 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.
    3. Montalbano, Pierluigi & Nenci, Silvia & Dell'Agostino, Laura, 2022. "A non-parametric assessment of the effects of the Euro on GVC trade," International Economics, Elsevier, vol. 172(C), pages 56-76.
    4. Yasin YILDIRIM, 2018. "Is The Adoption Of The Euro A Story Of Success Or Failure? An Assessment Under Economic And Political Reflections," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 3(2), pages 107-117.
    5. Salvador Gil-Pareja & Rafael Llorca-Vivero & José Antonio Martínez-Serrano, 2018. "The happy few: cross-country evidence of the euro effect on trade," Working Papers 1803, Department of Applied Economics II, Universidad de Valencia.
    6. Giovanni Cerulli & Silvia Nenci & Luca Salvatici & Antonio Zinilli, 2022. "Currency Unions and Global Value Chains: The Impact of the Euro on the Italian Value Added Exports," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(2), pages 373-407, July.
    7. Knobel, Alexander (Кнобель, Александр) & Chentsov, Alexander (Ченцов, Александр), 2018. "The Impact of Exchange Rates and Their Volatility on Russia's Foreign Trade, Taking into Account its Membership in EAEU [Влияние Обменных Курсов И Их Волатильности На Внешнюю Торговлю России С Учет," Working Papers 061824, Russian Presidential Academy of National Economy and Public Administration.

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    More about this item

    Keywords

    Euro; Currency Union Effect; Gravity Estimation;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F54 - International Economics - - International Relations, National Security, and International Political Economy - - - Colonialism; Imperialism; Postcolonialism

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