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Breaking badly: The currency union effect on trade

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  • Campbell, Douglas L.
  • Chentsov, Aleksandr

Abstract

As several European countries debate entering, or exiting, the euro, a key policy question concerns how much currency unions (CUs) affect trade. Despite the longstanding academic debate on the topic, recent research has continued to find that CUs exert a large effect on trade. We find, by contrast, that the sizeable recent estimated impact of CUs on trade is driven by other major geopolitical events and is also sensitive to dynamic controls. Overall, using various specifications and controls, we estimate that the impact of CUs on trade is indistinct from zero but with relatively large standard errors.

Suggested Citation

  • Campbell, Douglas L. & Chentsov, Aleksandr, 2023. "Breaking badly: The currency union effect on trade," Journal of International Money and Finance, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:jimfin:v:136:y:2023:i:c:s0261560623000414
    DOI: 10.1016/j.jimonfin.2023.102840
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Saga Continues: A New Addition to the Currency Unions and Trade Literature
      by Doug Campbell in Douglas L. Campbell on 2017-07-30 18:35:00

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    Cited by:

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    2. Knobel, Alexander (Кнобель, Александр) & Chentsov, Alexander (Ченцов, Александр), 2018. "The Impact of Exchange Rates and Their Volatility on Russia's Foreign Trade, Taking into Account its Membership in EAEU [Влияние Обменных Курсов И Их Волатильности На Внешнюю Торговлю России С Учет," Working Papers 061824, Russian Presidential Academy of National Economy and Public Administration.
    3. Yasin YILDIRIM, 2018. "Is The Adoption Of The Euro A Story Of Success Or Failure? An Assessment Under Economic And Political Reflections," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 3(2), pages 107-117.
    4. Santana-Gallego, Maria & Pérez-Rodríguez, Jorge V., 2019. "International trade, exchange rate regimes, and financial crises," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 85-95.
    5. Salvador Gil-Pareja & Rafael Llorca-Vivero & José Antonio Martínez-Serrano, 2018. "The happy few: cross-country evidence of the euro effect on trade," Working Papers 1803, Department of Applied Economics II, Universidad de Valencia.
    6. Silviano Esteve‐Pérez & Salvador Gil‐Pareja & Rafael Llorca‐Vivero & José Antonio Martínez‐Serrano, 2020. "EMU and trade: A PPML re‐assessment with intra‐national trade flows," The World Economy, Wiley Blackwell, vol. 43(10), pages 2574-2599, October.

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    More about this item

    Keywords

    Euro; Currency union effect; Gravity estimation;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F54 - International Economics - - International Relations, National Security, and International Political Economy - - - Colonialism; Imperialism; Postcolonialism

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