New Evidence on Trade and FDI: How Large Is the Euro Effect?

Open Economies Review, Volume 29, Issue 2, pp 451–467

Posted: 21 Apr 2019

See all articles by Mariam Camarero

Mariam Camarero

Jaume I University - Department of Economics

Estrella Gomez-Herrera

European Commission Joint Research Center

Cecilio R. Tamarit

University of Valencia - Department of Applied Economics

Date Written: May 17, 2018

Abstract

In this paper we analyse the effect that the euro has had on trade using a gravity model for 28 countries and covering the period 1990–2013. Our gravity specification includes time-varying fixed effects, correcting any possible bias that may arise from multilateral resistance variables or unobserved time-varying heterogeneity. Additionally, we explore the potential complementarity or substitution relationship between FDI and trade by including FDI inward and outward stocks in the specification. The time period in the dataset covers the creation and evolution of the European Monetary Union (EMU), starting from the introduction of notes and coins and including the recent economic crisis. Overall, our results show a positive effect of the EMU on trade and reveal the existence of a complementary relationship between trade and FDI.

Keywords: FDI, Trade, Euro effect

JEL Classification: F10, F15

Suggested Citation

Camarero Olivas, María Amparo (Mariam) and Gomez-Herrera, Estrella and Tamarit Escalona, Cecilio R., New Evidence on Trade and FDI: How Large Is the Euro Effect? (May 17, 2018). Open Economies Review, Volume 29, Issue 2, pp 451–467. Available at SSRN: https://ssrn.com/abstract=3342021

María Amparo (Mariam) Camarero Olivas

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

Estrella Gomez-Herrera (Contact Author)

European Commission Joint Research Center ( email )

1049
Belgium

Cecilio R. Tamarit Escalona

University of Valencia - Department of Applied Economics ( email )

4F04 Edificio Departamental Oriental
P.O. Box 22.006
Valencia, 33006
Spain
+34-963828349 (Phone)
+34-963828354 (Fax)

HOME PAGE: http://www.uv.ed/~tamac/

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