Does a currency union affect trade? The time-series evidence

Glick, Reuven; Rose, Andrew K.

doi:10.1016/s0014-2921(01)00202-1

Cited by 715 publications

(644 citation statements)

References 7 publications

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“…In truth, this is more a necessity that a choice: given the aim of the paperestablishing the impact of currency unions on international investment flows-there is the need to identify the origin and the destination of FDI's; yet gravity models have proven very accurate in explaining bilateral flows using a limited amount of information. Following Glick and Rose (2002), Micco et al (2003) and Pommerenke (2003), all time-invariant control variables are subsumed in country-pair fixed effects. Using fixed effects allows one to isolate the time-series variation and hence reduces the concerns about endogeneity or reverse-causation.…”

Section: Methodsology and Datamentioning

confidence: 99%

Common currencies and FDI flows

Schiavo¹

2007

Oxford Economic Papers

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The paper investigates the impact of EMU on foreign direct investment flows. Using the option value approach to investment decisions, it is possible to show how exchange rate uncertainty hinders cross-border investment flows. By permanently fixing bilateral exchange rates, a currency union can then be expected to spur international investment. Results from a gravity model on a sample of OECD countries confirm the hypothesis that currency unions have a positive impact on FDI; moreover, adopting the same currency appears to do more than merely eliminating exchange rate volatility. These findings closely resemble those recently obtained in the trade literature. JEL Codes: F15, F21. Terms of use: Documents in EconStor may

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Section: Methodsology and Datamentioning

confidence: 99%

Common currencies and FDI flows

Schiavo¹

2007

Oxford Economic Papers

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“…Tables (versions 5.6 and 6.1), and the World Bank's Global Development Network Growth Database, Macro Time Series (Easterly and Sewadeh 2002). Geographic and cultural information, such as on great-circle distance 30 , land border, common language, and colonial ties, comes from Glick and Rose's (2002) data set on gravity-model variables. I also use statistics on the average number of schooling years in the total population of destination and origin countries (over age 15) from Barro and Lee's (2000) data set.…”

Section: Datamentioning

confidence: 99%

International migration: a panel data analysis of the determinants of bilateral flows

2009

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In this paper I empirically investigate the determinants of migration inflows into fourteen OECD countries by country of origin, between 1980 and 1995. I analyze the effect on migration of average income and income dispersion in destination and origin countries. I also examine the impact of geographical, cultural, and demographic factors as well as the role played by changes in destination countries' migration policies. My analysis both delivers estimates consistent with the predictions of the international migration model and generates empirical puzzles.

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“…developed a cross-section estimation technique to control for omitted variables with pair fixed effects. 3 However, this technique has been generalized to the panel data framework by many authors without considering the time dimension (see, for example, Glick andRose, 2002 or Flam andNordstrom, 2006). Country dummies (for exporters and importers) only remove the average impact leaving the time dimension in the residuals, which leads to biased results.…”

Section: Previous Studies and Criticisms To The Empirical Applicamentioning

confidence: 99%

“…Ordinary Least Squares, OLS) are inappropriate, even if these problems have been largely ignored by applied researchers, as the econometric methods commonly used to solve them were not easy to implement. Glick and Rose (2002) and Frankel and Rose (2002) exploited the time series information using panel data, giving birth to a literature in search of 'more reasonable' effects (Eicher and Henn, 2011). Micco et al (2003) examined the dynamic impact of EMU on trade for 22 industrial countries using panel regressions based on a gravity model.…”

Section: Previous Studies and Criticisms To The Empirical Applicamentioning

confidence: 99%

Is the ‘euro effect’ on trade so small after all? New evidence using gravity equations with panel cointegration techniques

2014

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In this paper we present new evidence on the euro effect on trade. We use a data set containing all bilateral combinations in a panel of 26 OECD countries during the period 1967-2008.From a methodological point of view, we implement a new generation of tests that allow solving some of the problems derived from the non-stationary nature of the data. To this aim we apply panel tests that account for the presence of cross-section dependence as well as discontinuities in the non-stationary panel data. We test for cointegration between the variables using panel cointegration tests, especially the ones proposed by Banerjee and Carrión-i-Silvestre (2010). We also efficiently estimate the long-run relationships using the CUP-BC and CUP-FM estimators proposed in Bai et al. (2009). We argue that, after controlling for cross-section dependence and deterministic trends and breaks in trade integration, the euro appears to generate lower trade effects than predicted in previous studies. JEL classification numbers: C12, C22, F15, F10.

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Does a currency union affect trade? The time-series evidence

Cited by 715 publications

References 7 publications

Common currencies and FDI flows

Common currencies and FDI flows

International migration: a panel data analysis of the determinants of bilateral flows

Is the ‘euro effect’ on trade so small after all? New evidence using gravity equations with panel cointegration techniques

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