Disaggregated trade and disaggregated currency unions: a ranking of common currency effects

Research output: Journal PublicationsJournal Article (refereed)peer-review

1 Scopus Citations

Abstract

Andrew Rose has long argued that a common currency has a large effect on increasing trade. Recently, Rose has called into question the reliability of this conclusion, as new techniques have emerged for estimating gravity equations. This article uses the sector-specific gravity model developed by Anderson and Yotov (2010a) to investigate if disaggregated trade can provide a reliable estimate of a common currency’s effect. Disaggregating trade alone is insufficient to obtain a reliable estimate of a currency union, regardless of econometric technique, when the effect of a common currency on trade is uniform across all unions. Disaggregating the universe of currency unions with individual effects provides a reliable ranking of currency unions, independent of estimation method, by the effect that each union’s currency has on increasing trade. These rankings differ across sectors.
Original languageEnglish
Pages (from-to)661-670
Number of pages10
JournalAgricultural Economics
Volume47
Issue number6
DOIs
Publication statusPublished - Nov 2016

Keywords

  • Agriculture
  • Currency union
  • Gravity equation
  • International trade
  • Manufacturing

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