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EMU impact of on third countries’ exports. A gravity approach

  • Estrella Gómez

    ()

    (Universidad de Granada, Departamento de Teoría e Historia Económica)

  • Juliette Milgram Baleix

    ()

    (Universidad de Granada, Departamento de Teoría e Historia Económica)

In this article we explore the impact of the euro adoption and the effect of the volatility of the real exchange rate on trade both on intra EMU trade and on EMU trade with third countries. To this end, we use a large database covering 93% of world trade that includes 80 countries during the period 1980-2009. We estimate a gravity equation using one of the most complete specifications in the literature to isolate the euro effect from other factors affecting trade, as regional trade agreements or exchange rate volatility. Our results show that the elimination of the volatility boosted export per se especially before 1999 and therefore, the possibility to peg to the euro could boost trade of third countries and between these third countries.

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File URL: http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers10_26.pdf
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Paper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number 10/26.

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Length: 30 pages
Date of creation: 25 May 2012
Date of revision:
Handle: RePEc:gra:wpaper:10/26
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  1. David Barr & Francis Breedon & David Miles, 2003. "Life on the outside: economic conditions and prospects outside euroland," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 573-613, October.
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  11. Frankel, Jeffrey & Stein, Ernesto & Wei, Shang-jin, 1995. "Trading blocs and the Americas: The natural, the unnatural, and the super-natural," Journal of Development Economics, Elsevier, vol. 47(1), pages 61-95, June.
  12. Jelle Brouwer & Richard Paap & Jean-Marie Viaene, 2007. "The Trade and FDI Effects of EMU Enlargement," CESifo Working Paper Series 2123, CESifo Group Munich.
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