May 28, 2004 Andrew K. Rose: The Effects of Monetary Union: Trade, Output, and More?
Seminar
on May, 28. 2004, 2PM. MNB Vadász utca 16. Room 201
Andrew K. Rose (Rocca Professor
Haas School of Business, University of California, Berkeley)
Abstract 1
An Estimate of the Effect of Common Currencies on Trade and Income
Andrew K. Rose
Haas School of Business, University of California, Berkeley
and
Jeffrey A. Frankel
Harvard University, Kennedy School of Government
To quantify the implications of common currencies for trade and income, we use data for over 200 countries and dependencies. In our two-stage approach, estimates at the first stage suggest that belonging to a currency union/board triples trade with other currency union members. Moreover, there is no evidence of trade-diversion. Our estimates at the second stage suggest that every one percent increase in a country’s overall trade (relative to GDP) raises income per capita by at least one third of a percent. We combine the two estimates to quantify the effect of common currencies on output. Our results support the hypothesis that important beneficial effects of currency unions come through the promotion of trade.
Abstract 2
A Meta-Analysis of the Effect of Common Currencies on International Trade
Andrew K. Rose
Haas School of Business, University of California, Berkeley
Thirty- four recent studies have investigated the effect of currency union on trade, resulting in 754 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 a bilateral currency union increase trade by between 30% and 90%; and c) the estimates are heterogeneous and not consistently tied to most features of the studies.
Contact person: Zsolt Darvas
mail: darvaszs@mnb.hu