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Currency Unions and Trade: A Post-EMU Mea Culpa

Author

Listed:
  • Glick, Reuven
  • Rose, Andrew K

Abstract

In our European Economic Review (2002) paper, we used pre-1998 data on countries participating in and leaving currency unions to estimate the effect of currency unions on trade using (then-) conventional gravity models. In this paper, we use a variety of empirical gravity models to estimate the currency union effect on trade and exports, using recent data which includes the European Economic and Monetary Union (EMU). We have three findings. First, our assumption of symmetry between the effects of entering and leaving a currency union seems reasonable in the data but is uninteresting. Second, EMU typically has a smaller trade effect than other currency unions, often estimated to be negligible or negative. Third and most importantly, estimates of the currency union effect on trade are sensitive to the exact econometric methodology; we find no substantive reliable and robust effect of currency union on trade.

Suggested Citation

  • Glick, Reuven & Rose, Andrew K, 2015. "Currency Unions and Trade: A Post-EMU Mea Culpa," CEPR Discussion Papers 10615, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10615
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    Cited by:

    1. Mark Mink & Jan Jacobs & Jakob de Haan, 2016. "Euro Area Imbalances," CESifo Working Paper Series 6291, CESifo Group Munich.
    2. Corrado Macchiarelli, 2018. "What is the EU-UK relation all about? Tracking the path from monetary integration to “ever closeness”," LEQS – LSE 'Europe in Question' Discussion Paper Series 137, European Institute, LSE.
    3. repec:eee:rujoec:v:3:y:2017:i:3:p:280-295 is not listed on IDEAS
    4. Héricourt, Jérôme & Nedoncelle, Clément, 2018. "Multi-destination firms and the impact of exchange-rate risk on trade," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1178-1193.
    5. Joshua Aizenman, 2016. "Optimal Currency Area: A 20th Century Idea For the 21st Century?," NBER Working Papers 22097, National Bureau of Economic Research, Inc.
    6. repec:kap:openec:v:29:y:2018:i:2:d:10.1007_s11079-017-9455-y is not listed on IDEAS
    7. Rose, Andrew K, 2018. "Agent Orange: Trump, Soft Power, and Exports," CEPR Discussion Papers 13139, C.E.P.R. Discussion Papers.
    8. Mongelli, Francesco Paolo & Reinhold, Elisa & Papadopoulos, Georgios, 2016. "What's so special about specialization in the euro area?," Occasional Paper Series 168, European Central Bank.
    9. Katerina Arnostova & Oxana Babecka Kucharcukova & Jan Babecky & Vojtech Belling & Sona Benecka & Jan Bruha & Martin Gurtler & Tomas Holub & Eva Hromadkova & Lubos Komarek & Zlatuse Komarkova & Petr Kr, 2016. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2016," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number as16 edited by Katerina Arnostova & Lucie Matejkova, March.
    10. Cristina Fernández & Pilar García Perea, 2015. "The impact of the euro on euro area GDP per capita," Working Papers 1530, Banco de España;Working Papers Homepage.
    11. Tomas Adam & Oxana Babecka Kucharcukova & Jan Babecky & Vojtech Belling & Sona Benecka & Jan Bruha & Kamil Galuscak & Tomas Holub & Eva Hromadkova & Lubos Komarek & Zlatuse Komarkova & Kamila Kulhava , 2015. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2015," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number as15 edited by Kamila Kulhava & Lucie Matejkova, March.
    12. repec:onb:oenbmp:y:2017:i:q1/2017:b:6 is not listed on IDEAS
    13. Esposito, Piero, 2017. "Trade creation, trade diversion and imbalances in the EMU," Economic Modelling, Elsevier, vol. 60(C), pages 462-472.
    14. Goldberg, Linda S. & Tille, Cédric, 2016. "Micro, macro, and strategic forces in international trade invoicing: Synthesis and novel patterns," Journal of International Economics, Elsevier, vol. 102(C), pages 173-187.
    15. repec:cnb:ocpubv:as17 is not listed on IDEAS
    16. repec:onb:oenbmp:y:2017:i:1:b:5 is not listed on IDEAS
    17. Andrew K. Rose, 2016. "Like Me, Buy Me: The Effect of Soft Power on Exports," Economics and Politics, Wiley Blackwell, vol. 28(2), pages 216-232, July.
    18. repec:eee:ecmode:v:69:y:2018:i:c:p:49-57 is not listed on IDEAS

    More about this item

    Keywords

    bilateral; common; country; exports; fixed; gravity; Poisson; specific; time-varying;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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