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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
    as

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    References listed on IDEAS

    as
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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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    Keywords

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    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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