The euro's effect on trade: an analysis of "old" and "new" EMU members

Isaac Mensah

Abstract


This paper provides new empirical evidence of the ``euro effect" on bilateral trade by allowing for a heterogeneous impact on ``new" and ``old" EMU members. By applying a Poisson estimator and focusing on a sample of 38 countries, our results show a positive but statistically insignificant euro’s effect on bilateral exports. However, disaggregating this effect, we report a relatively large euro’s effect on bilateral trade for the “new” EMU countries. We also find no evidence of trade diversion, thus corroborating existing evidence. These results are robust to a number of sensitivity checks and, especially, to the use of a larger sample of countries. Finally, using country-pair and country-industry-pair data, our results indicate a reduction in export concentration in the bilateral trade of ``old" EMU countries. Instead, we find an increase in concentration in trade between ``new" and ``old" EMU countries.


Keywords


Gravity model; bilateral export; poisson; euro

Full Text:

PDF


DOI: http://dx.doi.org/10.5202/rei.v10i1.289



E-ISSN 2038-1379 -  2009-2024 University of Perugia