National Money as a Barrier to International Trade: The Real Case for Currency Union

Rose, Andrew K.; Wincoop, Eric van

doi:10.1257/aer.91.2.386

Cited by 606 publications

(429 citation statements)

References 7 publications

Supporting

Mentioning

393

Contrasting

Unclassified

Order By: Relevance

“…Over the last years, researchers such as Egger (2000), Rose and van Wincoop (2001), Mátyás (1998), Egger andPfaffermayr (2003, 2004), Glick and Rose (2002), Brun et al (2002), andMelitz (2007) have turned towards panel data 3 . Two main techniques are employed to fit data depending on the a priori assumptions.…”

Section: Linear Methodsmentioning

confidence: 99%

Comparing alternative methods to estimate gravity models of bilateral trade

Gómez-Herrera

2012

Empir Econ

191

View full text Add to dashboard Cite

Abstract. The gravity equation has been traditionally used to predict trade flows across countries. However, several problems related with its empirical application still remain unsolved. The unobserved heterogeneity, the presence of heteroskedasticity in trade data or the existence of zero flows, which make the estimation of the logarithm unfeasible, are some of them. This paper provides a survey of the most recent literature concerning the specification and estimation methods of this equation. For a dataset covering 80% of world trade, the most widely extended estimators are compared, showing that the Heckman sample selection model performs better overall for the specification of gravity equation selected.

show abstract

Section: Linear Methodsmentioning

confidence: 99%

Comparing alternative methods to estimate gravity models of bilateral trade

Gómez-Herrera

2012

Empir Econ

191

View full text Add to dashboard Cite

show abstract

“…The competing view, on the contrary, postulates that business cycle correlations and international trade linkages are not independent, but rather intertwined in a dynamic fashion, whereby closer commercial links result in more correlated business cycles (Frankel and Rose, 1998). In a number of papers, Rose (2000Rose ( , 2004 and his co-authors (Glick and Rose, 2002;Rose and Engel, 2000;Rose and van Wincoop, 2001) have devoted much effort to demonstrate a positive effect of common currencies on trade. If established, this relation would support the endogeneity argument through the link: single currency→more trade→closer output correlation.…”

Section: Introductionmentioning

confidence: 99%

Common currencies and FDI flows

Schiavo¹

2007

Oxford Economic Papers

View full text Add to dashboard Cite

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

show abstract

“…Specifically, we show that the tax gap responds positively to population size (and GDP) differences between countries and, crucially, that this relationship is significantly attenuated by trade integration. Our analysis thereby controls for the endogeneity of standard measures of trade integration by extracting the level of trade liberalisation between each country-pair from a gravity equation (Rose and Van Wincoop, 2001;Feenstra, 2003;Redding and Venables, 2004;Head and Mayer, 2011). This constitutes strong evidence since the relatively highly-integrated nature of OECD countries' economies provides an environment least likely to expose substantial effects.…”

Section: ---Figure 1 About Here ---mentioning

confidence: 99%

Trade integration and corporate income tax differentials

Exbrayat

Geys

2013

Int Tax Public Finance

View full text Add to dashboard Cite

Building on recent contributions to the New Economic Geography literature, this paper analyses the relation between asymmetric market size, trade integration and corporate income tax differentials across countries. First, relying on Ottaviano and Van Ypersele's (2005) footloose capital model of tax competition, we illustrate that trade integration reduces the importance of relative market size for differences in the extent of corporate taxation between countries. Then, using a dataset of 26 OECD countries over the period 1982-2004, we provide supportive evidence of these theoretical predictions: i.e., market size differences are strongly positively correlated with corporate income tax differences across countries but, crucially, trade integration weakens this link. These findings are obtained controlling for the potential endogeneity of trade integration and are robust to alternative specifications. 2 "You've had a broad substantial reduction in corporate tax rates outside the US. That occurs at a time when it's much easier (...) for companies to shift investment and income to take advantage of lower tax rates overseas. (...) To have a more competitive system, you want to try to bring down the rate closer to the range of our major trading partners." (Timothy Geithner, former US Treasury Secretary, Wall Street Journal, 28-30 January 2011, 9) IntroductionLooking at the evolution of corporate tax rates in developed countries over the last three decades, two observations stand out. The first is a decline in corporate tax rates (Figure 1, (Figure 1, right-hand side). ---Figure 1 about here ---Recent studies indicate the importance of such tax differences for firm location or FDI flows (Bénassy-Quéré et al., 2005;Kammas, 2011;Brülhart et al., 2012). Empirical analyses aimed at understanding what allows some countries to sustain higher tax rates than others have, however, not followed suit. 2 Yet, such insights can have important policy implications.1 This decline is also present when looking only at countries that were OECD members throughout the 1982-2011 period. 2 While numerous studies analyse the decline in corporate tax rates (Devereux et al., 2002(Devereux et al., , 2008Davies and Voget, 2008), Gilbert et al. (2005) is the only study analysing the determinants of corporate tax rate differentials. Compared to that study, we provide a firmer theoretical rationale for the analysis, address potential endogeneity problems, control for the influence of various country-level variables, and employ a Our results support theoretical predictions from Ottaviano and Van Ypersele (2005) and Haufler and Wooton (2010). Specifically, we show that the tax gap responds positively to population size (and GDP) differences between countries and, crucially, that this relationship is significantly attenuated by trade integration. Our analysis thereby controls for the endogeneity of standard measures of trade integration by extracting the level of trade liberalisation between each country-pair from a gravity equation (Rose ...

show abstract

National Money as a Barrier to International Trade: The Real Case for Currency Union

Cited by 606 publications

References 7 publications

Comparing alternative methods to estimate gravity models of bilateral trade

Comparing alternative methods to estimate gravity models of bilateral trade

Common currencies and FDI flows

Trade integration and corporate income tax differentials

Contact Info

Product

Resources

About