The Euro's Trade Effects

Baldwin, Richard E.

doi:10.2139/ssrn.886260

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The Euro's Trade Effects

ECB Working Paper No. 594

102 Pages Posted: 24 Apr 2006

See all articles by Richard E. Baldwin

Richard E. Baldwin

University of Geneva - Graduate Institute of International Studies (HEI); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: March 2006

Abstract

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

Baldwin, Richard E., The Euro's Trade Effects (March 2006). ECB Working Paper No. 594, Available at SSRN: https://ssrn.com/abstract=886260 or http://dx.doi.org/10.2139/ssrn.886260