The Euro's Effects on Trade in a Dynamic Setting

30 Pages Posted: 12 Apr 2007

See all articles by Sergio de Nardis

Sergio de Nardis

Istituto di Studi e Analisi Economica (ISAE)

Roberta de Santis

Italian National Institute of Statistics

Claudio Vicarelli

ISTAT - Italian National Institute of Statistics

Date Written: April 2007

Abstract

This paper provides an update of de Nardis and Vicarelli (2003) estimates of the euro effect on trade integration of EMU economies, taking into account aggregate bilateral exports of 23 OECD countries for the sample period 1988-2003. In this paper we utilize the dynamic panel data estimator proposed by Blundell and Bond (1998) and introduce controls for heterogeneity. The results of our dynamic specification of the gravity equation lead to an estimate of the intra-Eurozone pro-trade effect, following the adoption of the single currency, as high as around 4%. This finding, slightly lower than the previous work results, is in line with very recent empirical literature using dynamic specification of gravity equation. It is also consistent with the already tight trade links characterizing the economies that embraced the euro and with the possibility that the trade impact involved the introduction of new goods rather than the expansion, due to lower transaction costs, of the incumbent products.

Keywords: Trade, Currency Unions, Gravity models, Dynamic

JEL Classification: F14, F15, F4, F33, C33

Suggested Citation

de Nardis, Sergio and de Santis, Roberta and Vicarelli, Claudio, The Euro's Effects on Trade in a Dynamic Setting (April 2007). ISAE Working Paper No. 81, Available at SSRN: https://ssrn.com/abstract=979956 or http://dx.doi.org/10.2139/ssrn.979956

Sergio De Nardis

Istituto di Studi e Analisi Economica (ISAE) ( email )

Piazza dell' Indipendenza 4
I-00185
Italy

Roberta De Santis (Contact Author)

Italian National Institute of Statistics ( email )

Via Cesare Balbo 16
00184 Rome, 0185
Italy

Claudio Vicarelli

ISTAT - Italian National Institute of Statistics ( email )

Via Cesare Balbo 16
00184 Rome, 0185
Italy

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