Currency Unions and Trade: A Post-Emu Mea Culpa

37 Pages Posted: 8 Sep 2015 Last revised: 12 Oct 2015

See all articles by Reuven Glick

Reuven Glick

Federal Reserve Bank of San Francisco - Center for Pacific Basin Monetary & Economic Studies

Andrew Kenan Rose

University of California - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2015

Abstract

In our European Economic Review (2002) paper, we used pre-1998 data on countries participating in and leaving currency unions to estimate the effect of currency unions on trade using (then-) conventional gravity models. In this paper, we use a variety of empirical gravity models to estimate the currency union effect on trade and exports, using recent data which includes the European Economic and Monetary Union (EMU). We have three findings. First, our assumption of symmetry between the effects of entering and leaving a currency union seems reasonable in the data but is uninteresting. Second, EMU typically has a smaller trade effect than other currency unions; it has a mildly stimulating effect at best. Third and most importantly, estimates of the currency union effect on trade are sensitive to the exact econometric methodology; the lack of consistent and robust evidence undermines confidence in our ability to reliably estimate the effect of currency union on trade.

Suggested Citation

Glick, Reuven and Rose, Andrew Kenan, Currency Unions and Trade: A Post-Emu Mea Culpa (September 2015). NBER Working Paper No. w21535. Available at SSRN: https://ssrn.com/abstract=2656938

Reuven Glick (Contact Author)

Federal Reserve Bank of San Francisco - Center for Pacific Basin Monetary & Economic Studies ( email )

101 Market Street
San Francisco, CA 94105
United States
415-974-3184 (Phone)
415-974-2168 (Fax)

Andrew Kenan Rose

University of California - Haas School of Business ( email )

Berkeley, CA 94720
United States
510-642-6609 (Phone)
510-642-4700 (Fax)

HOME PAGE: http://faculty.haas.berkeley.edu/arose

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

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