Has the Euro Increased Trade?

Bun, Maurice J. G.; Klaassen, Franc

doi:10.2139/ssrn.338602

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Has the Euro Increased Trade?

16 Pages Posted: 29 Oct 2002

See all articles by Maurice J. G. Bun

Maurice J. G. Bun

University of Amsterdam (UVA) - Department of Quantitative Economics; Tinbergen Institute

Franc Klaassen

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); Tinbergen Institute

Date Written: October 10, 2002

Abstract

A major economic reason for the introduction of the euro was its supposedly positive effect on intra-EMU trade. Existing studies examine this suspicion indirectly using non-EMU data and report ambiguous results. We estimate the euro-effect directly from data that include EMU observations. Using a dynamic panel model for annual bilateral exports, we find that the euro has significantly increased trade, with an effect of 4% in the first year and cumulating to around 40% in the long-run. These estimates can be useful in the debates on whether to join the euro in countries such as the U.K.

Keywords: currency union, dynamic panel data model, EMU, exports, imperfect substitutes model

JEL Classification: C23, F15, F33

Suggested Citation: Suggested Citation

Bun, Maurice J. G. and Klaassen, Franc, Has the Euro Increased Trade? (October 10, 2002). Available at SSRN: https://ssrn.com/abstract=338602 or http://dx.doi.org/10.2139/ssrn.338602