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New evidence on Trade and FDI: how large is the Euro effect?

Author

Listed:
  • Miriam Camarero

    (Jaume I University. Department of Economics, Av. de Vicent Sos Baynat s/n, E-12071 Castellón, Spain)

  • Estrella Gómez-Herrera

    (University of Granada. Department of Economics, Av. del Hospicio s/n, E-18010 Granada, Spain)

  • Cecilio Tamarit

    (University of Valencia, INTECO Joint Research Unit. Department of Applied Economics II. PO Box 22.006 - E-46071 Valencia, Spain)

Abstract

In this paper we analyse the effect that the euro has had on trade using a gravity model for 26 OECD countries and covering the period 2002-2013. Our gravity specification includes time-varying fixed effects, correcting any possible bias that may arise from multilateral resistance variables or unobserved time-varying heterogeneity. Additionally, we explore the potential complementarity or substitution relationship between FDI and trade by including FDI inward and outward stocks in the specification. The time period in the dataset covers the creation and evolution of the European Monetary Union (EMU), starting from the introduction of notes and coins and including the recent economic crisis. Overall, our results show a positive effect of the EMU on trade and reveal the existence of a complementary relationship between trade and FDI.

Suggested Citation

  • Miriam Camarero & Estrella Gómez-Herrera & Cecilio Tamarit, 2017. "New evidence on Trade and FDI: how large is the Euro effect?," Working Papers 1709, Department of Applied Economics II, Universidad de Valencia.
  • Handle: RePEc:eec:wpaper:1709
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    References listed on IDEAS

    as
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    Keywords

    FDI; trade; euro effect;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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