Paper No. 22, Aug 2002

MAS Occasional Paper No. 22, Aug 2002

The Effects of Common Currencies on International Trade: Where Do We Stand?

By Professor Andrew K Rose, HAAS School of Business, University of California, Berkeley.  This paper was prepared while Professor Rose was visiting the Economics Department, MAS, in August 2002.




Twenty-four recent studies have investigated the effect of currency union on trade, resulting in 443 point estimates of the effect.  This paper is a quantitative attempt to summarize the current state of debate; meta-analysis is used to combine the disparate estimates.  The chief findings are that: (a) the hypothesis that there is no effect of currency union on trade can be rejected at standard significance levels; (b) the combined estimate implies that currency union approximately doubles trade; and (c) the estimates are heterogeneous and not consistently tied to features of the studies. 

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Last Modified on 26/11/2016