Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/37095
Authors: 
Herwartz, Helmut
Weber, Henning
Year of Publication: 
2010
Series/Report no.: 
Kiel Working Paper 1631
Abstract: 
This paper investigates if the euro's effect on euro-area trade differs across trade sectors and across country pairs, and to what degree heterogeneity matters for estimating the aggregate euro effect. Time-varying latent variables, which are specific to each sector in each country pair, control for omitted trade costs and mismeasured resistance terms. Parameter heterogeneity and time-varying latent variables are both strongly supported by the data. Due to decreasing trade costs, aggregate exports within the euro area increase between 2000 and 2002 by 15 to 25 percent compared with aggregate exports between European economies which are not members of the euro area. Adjustment within individual sectors is rapid whereas aggregate adjustment is more spread out and gradual since different sectors adjust at distinct times.
Subjects: 
Euro's trade effect
parameter heterogeneity
smooth-transition model
JEL: 
C31
C33
F13
F15
F33
F42
Document Type: 
Working Paper

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