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Two islands – two monies : the effect of breaking the Sterling link on Anglo-Irish trade

Author

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  • Brendan M. Walsh

Abstract

This paper studies the effect on Anglo-Irish trade of breaking the link between the Irish pound and sterling in 1979. A gravity model is used to explore this issue. No evidence is found of a structural break following the dismantling of the currency union. Nor did the resultant exchange rate volatility have a significant adverse effect on trade. These results do not support the belief that currency unions result in increased trade flows, either directly or by reducing exchange rate volatility.

Suggested Citation

  • Brendan M. Walsh, 2000. "Two islands – two monies : the effect of breaking the Sterling link on Anglo-Irish trade," Working Papers 200006, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200006
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    File URL: http://hdl.handle.net/10197/3041
    File Function: First version, 2000
    Download Restriction: no
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    More about this item

    Keywords

    Anglo-irish trade; Monetary policies; Currency; Trade flows; Gravity model; Volatility; Exchange rate; Ireland; Sterling; Monetary policy--Ireland; Foreign exchange rates--Econometric models--Ireland; Ireland--Commerce--Great Britain; Great Britain--Commerce--Ireland;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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