An Estimate of the Effect of Common Currencies on Trade and Income

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ID: 295298
2002
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Abstract
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 1 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.
Reference Key
openalex_W3126070516 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Jeffrey A. Frankel, Andrew K. Rose
Journal the quarterly journal of economics
Year 2002
DOI
10.1162/003355302753650292
URL
Keywords Keywords not found

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