Does a Currency Union Affect Trade? The Time Series Evidence
24 Pages Posted: 20 Jul 2001 Last revised: 25 Sep 2001
Date Written: July 2001
Does leaving a currency union reduce international trade? We answer this question using a large annual panel data set covering 217 countries from 1948 through 1997. During this sample a large number of countries left currency unions; they experienced economically and statistically significant declines in bilateral trade, after accounting for other factors. Assuming symmetry, we estimate that a pair of countries that starts to use a common currency experiences a doubling in bilateral trade.
Suggested Citation: Suggested Citation