Dollarization and Trade
Dollarization has been suggested as a policy that might, among other goals, promote trade between a country adopting the dollar and the United States. Evidence supporting this conjecture could be drawn from a recent series of papers by Rose and co-authors who show that a currency union increases bilateral trade among its members, and that this effect is both large and statistically significant. In this paper we show that this result is not robust if we consider bilateral United States trade (even though the United States accounts for 60 percent of all observations of currency unions between industrial and non-industrial countries), nor if we consider bilateral trade of countries that have adopted the United States dollar, like Panama. Furthermore, the effect of dollarization on trade with the United States is not statistically distinct from the effect of a fixed dollar exchange rate on trade with the United States.
|Date of creation:||Apr 2002|
|Date of revision:|
|Publication status:||published as Klein, Michael W. "Dollarization And Trade," Journal of International Money and Finance, 2005, v24(6,Oct), 935-943.|
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- Jeffrey Frankel & Andrew Rose, 2002.
"An Estimate Of The Effect Of Common Currencies On Trade And Income,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(2), pages 437-466, May.
- Frankel, Jeffrey & Rose, Andrew K., 2001. "An Estimate of the Effect of Common Currencies on Trade and Income," Working Paper Series rwp01-013, Harvard University, John F. Kennedy School of Government.
- Silvana Tenreyro & Robert J. Barro, 2003.
"Economic Effects of Currency Unions,"
NBER Working Papers
9435, National Bureau of Economic Research, Inc.
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American Economic Review,
American Economic Association, vol. 91(2), pages 238-242, May.
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NBER Working Papers
7927, National Bureau of Economic Research, Inc.
- Michael R. Pakko & Howard J. Wall, 2001. "Reconsidering the trade-creating effects of a currency union," Review, Federal Reserve Bank of St. Louis, issue May, pages 37-46.
- Jay C. Shambaugh, 2004. "The Effect of Fixed Exchange Rates on Monetary Policy," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 300-351, February.
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- Glick, Reuven & Rose, Andrew K, 2001.
"Does a Currency Union Affect Trade? The Time Series Evidence,"
CEPR Discussion Papers
2891, C.E.P.R. Discussion Papers.
- Glick, Reuven & Rose, Andrew K., 2002. "Does a currency union affect trade? The time-series evidence," European Economic Review, Elsevier, vol. 46(6), pages 1125-1151, June.
- Reuven Glick & Andrew K. Rose, 2001. "Does a currency union affect trade? the time series evidence," Working Paper Series 2001-13, Federal Reserve Bank of San Francisco.
- Reuven Glick & Andrew K. Rose, 2001. "Does a Currency Union Affect Trade? The Time Series Evidence," NBER Working Papers 8396, National Bureau of Economic Research, Inc.
- Sebastian Edwards, 2001. "Dollarization and Economic Performance: An Empirical Investigation," NBER Working Papers 8274, National Bureau of Economic Research, Inc.
- Rodney Thom & Brendan Walsh, 2001. "The Effect of a Common Currency on Trade - Ireland before and after the Sterling Link," Working Papers 200110, School of Economics, University College Dublin.
- Thom, Rodney & Walsh, Brendan, 2002. "The effect of a currency union on trade: Lessons from the Irish experience," European Economic Review, Elsevier, vol. 46(6), pages 1111-1123, June.
- Torsten Persson, 2001. "Currency unions and trade: how large is the treatment effect?," Economic Policy, CEPR;CES;MSH, vol. 16(33), pages 433-462, October.
- Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
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