The Currency Union Effect on Trade: Early Evidence from EMU

By A. Micco, Ernesto H. Stein, Guillermo Ordoñez. 2003

656 citations recorded by the source corpus.

In this paper we estimate the early effect of the European Monetary Union (EMU) on trade. We use a panel data set that includes the most recent information on bilateral trade for 22 developed countries from 1992 through 2002. During this period 12 European countries formally entered into a currency union. This is a unique event that allows us to study the effect of currency union among a relatively homogeneous group of industrial countries. Controlling for a host of other factors, we find that the effect of EMU on bilateral trade between member countries ranges between 5 and 10 percent, when compared to trade between all other pairs of countries, and between 9 and 20 percent, when compared to trade among non-EMU countries. In addition, we find no evidence of trade diversion. If anything, our results suggest that monetary union increases trade not just with EMU countries, but also with the rest of the world.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/1adcc5ddcf2ae6c4e65bd5c21a0f74c6f57e1e44

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Citations in the corpus

The Euro Effect on Trade is not as Large as Commonly Thought (2007, neutral): “Rose (2000) explains bilateral trade (exports plus imports) by national income of both countries, their incomes per capita, free trade area and currency union dummies, and time-invariant variables such as distance.”
The European Union, the Euro, and Equity Market Integration (2010, background): “, Nicolaides and Boean, 1996). It is conceivable that shorter distances lead to a faster accession process. Fischer, Sahay, and Gramont (1998), studying the economic distance between the Eastern European entrants and Brussels, also mention that physical distance should matter, but do not elaborate o”
Measuring the Trade Effects of Emu (2004, methodology): “The country-specific impact—expressed as a negative deviation from the aggregate EMU effect—is statistically significant for the latter two countries.17 16 See also Micco, et al (2003) .”
Does Turkey have a special trade relation with the EU (2006, neutral): “What is relevant here is that the coefficient of EMU dummy (value one if both trade partners are in the EMU, zero otherwise) is large and significant (see Micco et al., 2003).”
The Eurozone and Political Economic Institutions (2016, background): “…the empirical evidence suggests that the euro made a substantial contribution to integration in all these areas (Bun & Klaassen 2002, 2007; Barr et al. 2003; Micco et al. 2003; Baldwin 2006; Blank & Buch 2007; Petroulas 2007; Baldwin et al. 2008; Coeurdacier & Martin 2009; De Sousa & Lochard 2011).”
Currency unions and trade: The special case of EMU (2003, methodology): “Micco et al. (2003) estimate the early effect of the European Monetary Union on trade.”