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Currency unions and trade: a post-EMU mea culpa

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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; it has a mildly stimulating effect at best. Third and most importantly, estimates of the currency union effect on trade are sensitive to the exact econometric methodology; the lack of consistent and robust evidence undermines confidence in our ability to reliably estimate the effect of currency union on trade.

Suggested Citation

  • Glick, Reuven & Rose, Andrew K., 2015. "Currency unions and trade: a post-EMU mea culpa," Working Paper Series 2015-11, Federal Reserve Bank of San Francisco, revised 17 Jul 2015.
  • Handle: RePEc:fip:fedfwp:2015-11
    DOI: 10.24148/wp2015-11
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Unioni monetarie e integrazione economica
      by Alberto Bagnai in Goofynomics on 2016-03-28 14:23:00

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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. repec:onb:oenbmp:y:2017:i:q1/2017:b:6 is not listed on IDEAS
    3. 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.
    4. 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.
    5. Esposito, Piero, 2017. "Trade creation, trade diversion and imbalances in the EMU," Economic Modelling, Elsevier, vol. 60(C), pages 462-472.
    6. 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.
    7. 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.
    8. 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.
    9. repec:eee:ecmode:v:69:y:2018:i:c:p:49-57 is not listed on IDEAS
    10. repec:cnb:ocpubv:as17 is not listed on IDEAS
    11. repec:eee:rujoec:v:3:y:2017:i:3:p:280-295 is not listed on IDEAS
    12. 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.
    13. Joshua Aizenman, 2016. "Optimal Currency Area: A 20th Century Idea For the 21st Century?," NBER Working Papers 22097, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

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

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