Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86015
Authors: 
Bun, Maurice J.G.
Klaassen, Franc J.G.M.
Year of Publication: 
2003
Series/Report no.: 
Tinbergen Institute Discussion Paper 03-086/2
Abstract: 
To study the effect of the euro on international goods trade one typically estimates a panel model for the level of trade. Trade levels increase over time, and we show that this is not fully explained by the included regressors. Because the euro is only present at the end of the sample, this may have led to an upward bias in existing euro estimates to help explain the upward trend. To correct for that, we extend the panel model (a gravity model) by including a time trend that may have different effects across country-pairs. Data on industrialized countries over 1967-2002 show the existing euro effects of between 5% and 40% shrink to a statistically insignificant 3%. For comparison, the estimated trade effects of other currency unions are reduced from90% to 25%. Hence, accounting for time trends matters.
Subjects: 
currency union
deterministic trend
EMU
fixed effects
gravity model
panel data
JEL: 
C23
F15
F33
Document Type: 
Working Paper

Files in This Item:
File
Size
340.89 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.