Life on the outside: economic conditions and prospects outside euroland

By D. Barr, Francis Breedon, D. Miles. 2003

155 citations recorded by the source corpus.

The European economic and monetary union (EMU) is now over 4 years old. In this paper we assess whether monetary union has begun to have significant economic effects by comparing countries in EMU with the EU countries outside. We focus principally on trade creation between EMU member countries, using a methodology that controls for the fact that the decision to join the monetary union was not random but was more likely to be taken by countries whose prospects of trading with other EMU members were already high. We find that the trade effects of monetary union are significant. We estimate that had the UK been inside EMU the sum of its imports and exports could have been substantially greater. For comparative purposes, we also make preliminary estimates of the effect of monetary union on three other dimensions of economic performance: foreign direct investment, the development of financial markets and overall macroeconomic performance, though we recognize that our ability to control for other factors is more limited in respect of these other indicators. The evidence suggests that inward investment in the countries outside would have been greater had they joined EMU, but that the impact of this on GDP would be no more than 0.3% of GDP per annum for the UK and less than that for the other ‘outs’. Financial market activity shows no clear sign of having been affected by EMU, and London’s position as Europe’s financial centre remains, as yet, largely unchallenged. On standard measures of aggregate performance – inflation, unemployment and output – no clear pattern of EMU effects has yet emerged.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/4b2c57b5e58bb11dca6d1a43f8f249dcc54de630

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Citations in the corpus

Zooming Out: The Trade Effect of the Euro in Historical Perspective (2008, background): “Other papers, including Baldwin, Skudelny, and Taglioni (2005), Barr, Breedon, and Miles (2003), Bun and Klaassen (2002), De Nardis and Vicarelli (2003), De Sousa and Lochard (2004), Faruqee (2004), and Flam and Nordström (2003), report broadly similar, and often even larger, estimates.”
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 &…”
The impact of the introduction of the Euro on foreign exchange rate risk exposures (2006, unknown): “(2003), Bun and Klaassen (2003), Barr et al. (2003), document significant increases in trade between Euro countries as well as trade with outside countries after the introduction of the Euro.”
The effect of the euro on foreign direct investment (2007, background): “These include Bun and Klaasen (2002), Barr et al. (2003), Micco et al. (2003) and Flam and Nordström (2003).”
Does the Single Currency Affect Foreign Direct Investment (2011, methodology): “In this paper, we attempt to answer these questions, which are “key issues in the economic debate between those who see major advantages (. . .) adopting the euro and those who see more costs than benefits” (Barr et al., 2003, p. 585).”
The Euro and European Financial Market Dependence (2007, background): “At the same time, significant increases in trade between Euro countries as well as trade with outside countries have been observed after the introduction of the Euro, indicating stronger integration of the real sector (e.g. Barr et al., 2003; Micco et al., 2003).”
Trade Effects of the Euro: Evidence from Sectoral Data (2005, unknown): “This is roughly in line with the findings of other similar studies that include Barr et al (2003), Bun and Klaassen (2002), and De Nardis and Vicarelli (2003).”