Working Paper

Trade Effects of Monetary Integration in Large, Mature Economies: A Primer on the European Monetary Union

Author

  • Lúcio Vinhas de Souza
Publication Date

The aim of this paper is to estimate the trade gains arising from the constitution of a currency union for a set of economically large, developed nations who create a monetary union as a deliberate economic policy action: namely, for the members of the euro area. With a 1980-2001 sample, no consistent significant trade effects from the 1999 creation of EMU are found, using dummies for the 1999-2001 period. Treating EMU not as a single event but as a part of a long-term integration process, and representing it by a series of continuous cross-country interest differentials, the evidence seems to be stronger, but it does not seem to be conditional on any single, specific exchange rate arrangement.

Info

JEL Classification
F15, F33

Key Words

  • Currency Unions
  • EMU
  • EU
  • gravity equation
  • panel model