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The Euro's Effect on Trade on a Dynamic Setting

Author Info

Listed author(s):
  • Sergio de Nardis

    (ISAE - Institute for Studies and Economic Analyses)

  • Roberta De Santis

    (ISAE - Institute for Studies and Economic Analyses)

  • Claudio Vicarelli

    (ISAE - Institute for Studies and Economic Analyses)

Abstract

This paper provides an update of de Nardis and Vicarelli (2003) estimates of the euro effect on trade integration of EMU economies, taking into account aggregate bilateral exports of 23 OECD countries for the sample period 1988-2003. In this paper we utilize the dynamic panel data estimator proposed by Blundell and Bond (1998) and introduce controls for heterogeneity. The results of our dynamic specification of the gravity equation lead to an estimate of the intra-Eurozone pro-trade effect, following the adoption of the single currency, as high as around 4%. This finding, slightly lower than our previous work results, is in line with very recent empirical literature using dynamic specification of gravity equation. It is also consistent with the already tight trade links characterizing the economies that embraced the euro and with the possibility that the trade impact involved the introduction of new goods rather than the expansion, due to lower transaction costs, of the incumbent products.

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File URL: http://lipari.istat.it/digibib/Working_Papers/WP_80_2007_deNardis_DeSantis_Vicarelli.pdf
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Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 80.

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Length: 26 pages
Date of creation: Apr 2007
Handle: RePEc:isa:wpaper:80
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Keywords: International Trade; Currency Unions; Gravity models; Dynamic Panel Data;

Other versions of this item:

Find related papers by JEL classification:
  • F14 - International Economics - - Trade - - - Empirical Studies of Trade
  • F15 - International Economics - - Trade - - - Economic Integration
  • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
  • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
  • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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