The Euro's Trade Effects
102 Pages Posted: 24 Apr 2006
Date Written: March 2006
This paper reviews and reassesses the methodology and principal findings of the "Rose effect," i.e., the trade effects of currency union, looking at both EMU and non-EMU currency unions. The consensus estimate suggests that the euro has already boosted intra-euro area trade by five to ten percent. The paper discusses a gamut of models that might explain the Rose effect in Europe and suggests a series of empirical test that could help identify the economic mechanisms involved.
Keywords: Rose effect, exchange rate volatility, monetary union, gravity model
JEL Classification: F12, C33, E0
Suggested Citation: Suggested Citation