Abstract
This paper quantifies the most likely trade effects of the euro introduction using a panel data set of 29 European economies extended over the period 1994 to 2011. For this purpose, a gravity model of international trade is used. Following the recommendations of Santos Silva and Tenreyro (2006) paper [The log of gravity. Rev Econ Stat. 88 (4), 641–658], the gravity equation is estimated using Poisson pseudo-maximum-likelihood (PPML) technique. The main finding of this study is that the introduction of the euro has a small but statistically significant effect on export flows of European economies. The PPML estimates report this effect (euro effect) to be around 7%. This effect, although small, matches with the findings of the recent studies.
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Notes
- 1.
Since the coefficient of CU dummy is 0.071, the increase in bilateral exports induced by the adoption of the euro is \( \left[ {\left( {\frac{{e^{0.071 \, \times \, 1} }}{{e^{{0.071 \, \times { 0}}} }} - 1} \right) \times 100} \right] = \left[ {\left( {\frac{1.07358}{1.00} - 1} \right) \times 100} \right] = 0.07358 \times 100 = 7.36\% \).
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Kunroo, M.H., Sofi, I.A., Khurana, M., Mogha, S.K. (2017). Re-visiting the Impact of the Euro on Trade Flows: New Evidence Using Gravity Equation with Poisson Count-Data Technique. In: Deep, K., et al. Proceedings of Sixth International Conference on Soft Computing for Problem Solving. Advances in Intelligent Systems and Computing, vol 547. Springer, Singapore. https://doi.org/10.1007/978-981-10-3325-4_23
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