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Has the Euro Increased Trade?

Maurice J.G. Bun
University of Amsterdam (UVA) - Department of Quantitative Economics; Tinbergen Institute

Franc J. G. M. Klaassen
University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); Tinbergen Institute

October 10, 2002

Abstract:
A major economic reason for the introduction of the euro was its supposedly positive effect on intra-EMU trade. Existing studies examine this suspicion indirectly using non-EMU data and report ambiguous results. We estimate the euro-effect directly from data that include EMU observations. Using a dynamic panel model for annual bilateral exports, we find that the euro has significantly increased trade, with an effect of 4% in the first year and cumulating to around 40% in the long-run. These estimates can be useful in the debates on whether to join the euro in countries such as the U.K.

Keywords: currency union, dynamic panel data model, EMU, exports, imperfect substitutes model

JEL Classifications: C23, F15, F33

Working Paper Series

Date posted: October 29, 2002 ; Last revised: October 29, 2002

Suggested Citation

Bun, Maurice J.G. and Klaassen, Franc J. G. M., Has the Euro Increased Trade? (October 10, 2002). Available at SSRN: http://ssrn.com/abstract=338602 or doi:10.2139/ssrn.338602

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Contact Information

Franc J.G.M. Klaassen (Contact Author) University of Amsterdam - Research Institute in Economics & Econometrics (RESAM) ( email ) Roetersstraat 11 Amsterdam Netherlands +31 20 525 4191 (Phone) +31 20 525 4254 (Fax)
Tinbergen Institute ( email ) Burg. Oudlaan 50 Rotterdam 3062 PA Netherlands
Maurice J.G. Bun University of Amsterdam (UVA) - Department of Quantitative Economics ( email ) Roetersstraat 11 1018 WB Amsterdam Netherlands +31-20-5254257 (Phone)
Tinbergen Institute ( email ) Burg. Oudlaan 50 Rotterdam 3062 PA Netherlands