Does a Currency Union Affect Trade? The Time Series Evidence

Glick, Reuven; Rose, Andrew Kenan

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Does a Currency Union Affect Trade? The Time Series Evidence

27 Pages Posted: 7 Aug 2001

See all articles by Reuven Glick

Reuven Glick

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

Andrew Kenan Rose

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

There are 2 versions of this paper

Date Written: July 2001

Abstract

Does leaving a currency union reduce international trade? We answer this question using a large annual panel data set covering over 230 countries from 1948-97. During this sample over one hundred pairs of countries had currency union dissolutions; 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.

Keywords: Monetary, gravity, empirical, international, bilateral, country, common currency, union, fixed, random, effects, within

JEL Classification: F15, F33

Suggested Citation: Suggested Citation

Glick, Reuven and Rose, Andrew Kenan and Rose, Andrew Kenan, Does a Currency Union Affect Trade? The Time Series Evidence (July 2001). Available at SSRN: https://ssrn.com/abstract=278575