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Trade Effects of Currency Unions: Do Economic Dissimilarities Matter?

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  • Ms. Giorgia Albertin

Abstract

This paper provides a general equilibrium analysis of the trade effects of the formation of a currency union, and of its subsequent enlargement to include an economically dissimilar country. Furthermore, it investigates how economic dissimilarities among countries affect the magnitude of the trade effects fostered by a common currency. We show that sharing a common currency enhances the volume of bilateral trade among countries. However, the more economically dissimilar is an accession country, compared to the original members of a currency union, the smaller are the gains in trade that would follow the enlargement of a currency union.

Suggested Citation

  • Ms. Giorgia Albertin, 2008. "Trade Effects of Currency Unions: Do Economic Dissimilarities Matter?," IMF Working Papers 2008/249, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2008/249
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    References listed on IDEAS

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    Cited by:

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    2. Eva Bieleková & Ján Pokrivčák, 2020. "Determinants of International Beer Export," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 12(2), June.

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    Keywords

    WP; currency union; trade cost;
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