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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- 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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"Does a currency union affect trade? The time-series evidence,"
European Economic Review,
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"Fewer Monies, Better Monies,"
American Economic Review,
American Economic Association, vol. 91(2), pages 238-242, May.
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"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.
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NBER Working Papers
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- 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.
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