The Effect of Membership in the European Monetary Union on Trade Between Member Countries (An Empirical Study)

Dublin Core

Title

The Effect of Membership in the European Monetary Union on Trade Between Member Countries (An Empirical Study)

Description

The question of whether or not to adopt the euro is a very important one, not only for the 13 European Union members that do not share the same currency, but also for future EU candidates. Current literature on the effect of the euro on trade is scarce since the European Monetary Union (EMU) was officially created in 1999, and up until recently there has not been enough data to analyze this issue. This paper aims to estimate the effect of the euro on trade between member countries using the standard gravity model of trade. Using data from current 25 EU members over the period from 1997 to 2004, I show that higher trade volumes between EMU members cannot be attributed to the adoption of the euro. I find evidence that the euro adoption has had a short-run effect on bilateral trade and that this effect is eliminated over a short period of time. My findings suggest that members of the EMU trade on average from 8.8% to 47% more compared to non-members depending on the type of regression used, while members of the Free Trade Agreement trade 61.3% more. The effect of the euro on trade is eliminated as soon as I control for country-pair specific effects that include the FTA effect as well as history of trade relations between two countries. I conclude that the adoption of the euro should be seen as a final step in the European economic and monetary integration for countries that already benefit from relatively high volumes of bilateral trade.
Full text availale at: https://doi.org/10.22215/rera.v2i1.166

Creator

Soroka, Ihor

Source

Canadian Journal of European and Russian Studies; 2006: RERA V2:1 European Economic and Monetary Governance (backfile abstracts)
2562-8429
10.22215/cjers.v2i1

Publisher

Centre for European Studies, Carleton University

Date

2006-03-01

Rights

Copyright (c) 2006 Canadian Journal of European and Russian Studies

Type

info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article

Identifier

Citation

Ihor Soroka, The Effect of Membership in the European Monetary Union on Trade Between Member Countries (An Empirical Study), Centre for European Studies, Carleton University, 2006, accessed November 8, 2024, https://igi.indrastra.com/items/show/2703

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