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Title:Readdressing the Trade Effect of the Euro: Allowing for Currency Misalignment PDF Logo
Authors:Hogrefe, Jan
Jung, Benjamin
Kohler, Wilhelm K.
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Trade, Financial Markets, and the Euro E12-V1
Abstract:We know that euro-area member countries have absorbed asymmetric shocks in ways that are inconsistent with a common nominal anchor. Based on a reformulation of the gravity model that allows for such bilateral currency misalignment, we disentangle the conventional trade cost channel and trade effects deriving from currency misalignment. Econometric estimation reveals that the currency misalignment channel exerts a significant trade effect on bilateral exports. We retrieve country specific estimates of the euro effect on trade based on misalignment. This reveals asymmetric trade gains and heterogeneous outlooks across countries for the costs and benefits from adopting the euro.
Subjects:gravity model
euro effect
European divergence
JEL:F12
F13
F15
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

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