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Estimating the Impact of Currency Unions on Trade Using a Dynamic Gravity Framework

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  • Douglas Campbell

    (Department of Economics, University of California Davis)

Abstract

Does leaving a currency union reduce international trade? This paper reexamines time series estimates of currency unions on trade from a historical perspective using a dynamic gravity equation and by conducting in-depth case studies of currency union breakups. The early large estimates are sensitive to dynamic specifications, and were driven by omitted variables, as many breakups were caused by warfare, communist takeovers, coup d'etats and other major geopolitical events. The methodology has general applicability for the use of gravity equations in policy analysis, and yields an imprecise point estimate of currency unions on trade close to one percent.

Suggested Citation

  • Douglas Campbell, 2012. "Estimating the Impact of Currency Unions on Trade Using a Dynamic Gravity Framework," Working Papers 29, University of California, Davis, Department of Economics.
    • Handle: RePEc:cda:wpaper:29
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    1. Currency unions and trade
      by Economic Logician in Economic Logic on 2012-03-21 18:58:00

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    Cited by:

    1. Meriem Bouchoucha, 2015. "The Euro Effect on Eurozone Exports," International Economic Journal, Taylor & Francis Journals, vol. 29(3), pages 399-418, September.

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    More about this item

    Keywords

    Currency Unions; Trade; Dynamic Gravity; Decolonization;
    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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