Is the ‘Euro Effect’ on Trade So Small After All? New Evidence Using Gravity Equations With Panel Cointegration Techniques

Economics Letters, Volume 124, Issue 1, July 2014, Pages 140-142

Posted: 21 Apr 2019

See all articles by Estrella Gomez-Herrera

Estrella Gomez-Herrera

European Commission Joint Research Center

Mariam Camarero

Jaume I University - Department of Economics

Cecilio R. Tamarit

University of Valencia - Department of Applied Economics

Date Written: March 22, 2019

Abstract

In this paper we present new evidence on the aggregate effect of the euro on trade using data for 26 OECD countries for the period 1967–2008. We strive to fill the gaps present in the previous literature through a second-generation panel cointegration tests and estimators that account for both cross-section dependence in the data and discontinuities in the deterministic and the cointegrating vector in the time dimension. This approach allows us to put the adoption of the euro by EMU members in historical perspective. We argue that the creation of the EMU is best interpreted as a progression of policy changes. Once we control for all of them the euro effect decreases considerably but is still significant.

Keywords: Gravity Models, Trade, Panel Cointegration, Common Factors, Structural Breaks, Cross-Section Dependence

JEL Classification: C12, C22, F15, F10

Suggested Citation

Gomez-Herrera, Estrella and Camarero Olivas, María Amparo (Mariam) and Tamarit Escalona, Cecilio R., Is the ‘Euro Effect’ on Trade So Small After All? New Evidence Using Gravity Equations With Panel Cointegration Techniques (March 22, 2019). Economics Letters, Volume 124, Issue 1, July 2014, Pages 140-142. Available at SSRN: https://ssrn.com/abstract=3358366

Estrella Gomez-Herrera (Contact Author)

European Commission Joint Research Center ( email )

1049
Belgium

María Amparo (Mariam) Camarero Olivas

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

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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