The Economic and Monetary Union’s effect on (international) trade: the case of Slovenia before euro adoption

Aristovnik, Aleksander and Matevz, Meze (2009): The Economic and Monetary Union’s effect on (international) trade: the case of Slovenia before euro adoption.

Abstract

The main objective of the following article is to present the key findings of the existent research in the field of the influence the introduction of the euro had on the trade of the member states of the Economic and Monetary Union (EMU). The intention of this article is also to inspire further research (especially concerning the effect of the euro on the Slovene foreign trade). Recent empirical researches show that the trade among the members of the EMU has grown on average by 10–15 % due to the use of a common currency and there was also an increase in trade with the non-member states. The trade benefits of the entry of new countries into the EMU will thus not be the same as the benefits of the initial formation of the EMU in the nineties. This claim has been tested on the example of Slovenia. A regression analysis of time series shows that there has been a positive effect on Slovenia’s exports into and a negative effect on its imports from the eurozone precisely at the time of the creation of the EMU in 1999.

• Item Type: MPRA Paper
• Language: English
• Keywords: euro, foreign trade, Economic and monetary union (EMU), Slovenia, time series
• Subjects: F - International Economics > F1 - Trade > F15 - Economic Integration; F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F3 - International Finance > F30 - General; F - International Economics > F1 - Trade > F17 - Trade Forecasting and Simulation

References

Baldwin, R. E. (2006a), The euro's trade effect. Working Paper Series, no.594. European Central Bank. [Online] at: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp594.pdf (referred on 08/05/2009)

Baldwin, R. E. (2006b), In or out, Does it make a difference: An evidence based analysis of the trade effects of the euro. [Online] at: http://hei.unige.ch/~baldwin/policy.html#Euro (referred on 08/05/2009)

Baum, C. F. & Caglayan M. (2007), Effects of Exchange Rate Volatility on the Volume and Volatility of Bilateral Exports. Money Macro and Finance (MMF) Research Group Conference 2006. Money Macro and Finance Research Group. [Online] at: http://repec.org/mmf2006/up.1991.1145197920.pdf

Berger, H. & Nitsch, V. (2005), Zooming Out: The Trade Effect of the Euro in Historical Perspective. CESifo Working Paper, No. 1435. CESifo GmbH. [Online] at: http://www.cesifo-group.de/DocCIDL/cesifo1_wp1435.pdf (referred on 08/05/2009)

Breedon, F. & Pétursson, T.G. (2004), Out in the cold? Iceland's trade performance outside the EU. Working papers No.26. Department of Economics, Central bank of Iceland. [Online] at: http://www.sedlabanki.is/uploads/files/WP-26.pdf (referred on 07/01/2009)

Bun, M. J. G. & Klaassen F. (2002), Has the Euro increased Trade? Tinbergen Institute Discussion Papers 02-108/2. Tinbergen Institute. [Online] at: http://www.tinbergen.nl/discussionpapers/02108.pdf (referred on 08/05/2009)

Bun, M.J.G. & Klaassen, F.J.G.M. (2006), The Euro Effect on Trade is not as Large as Commonly Thought. [Online] at: http://www1.fee.uva.nl/pp/klaassen/index_files/trend27_forthcoming.pdf (referred on 16/04/2009)

Côté, A. (1994), Exchange Rate Volatility and Trade: A Survey. Working Papers, 94-5. Bank of Canada. [Online] at: http://www.bankofcanada.ca/en/res/wp/1994/wp94-5.pdf (referred on 03/05/2009)

de Nardis S. & Vicarelli C. (2003), The Impact of the Euro on Trade: The (Early) Effect is Not So Large. Economics Working Papers 017. European Network of Economic Policy Research Institutes. [Online] at: http://aei.pitt.edu/1851/01/ENEPRI_WP17.pdf (referred on 08/08/2009)

de Nardis, S., De Santis, R. & Vicarelli, C. (2007a), The Euro's Effect on Trade on a Dynamic Setting. ISAE Working Papers, 80. Rim: Institute for Studies and Economic Analyses. [Online] at: http://www.isae.it/Working_Papers/WP_80_2007_de%20Nardis_De%20Santis_Vicarelli.pdf (referred on 08/03/2009)

de Nardis, S., De Santis, R. & Vicarelli, C. (2007b), The single currency's effects on Eurozone sectoral trade: winners and losers? ISAE Working Papers, 88. Rim: Institute for Studies and Economic Analyses. [Online] at: http://www.isae.it/Working_Papers/WP_88_2007_DeNardis_DeSantis_Vicarelli.pdf (referred on 09/05/2009)

De Sousa, J. & Lochard, J. (2004), The currency union effect on trade and the FDI channel. Cahiers de la Maison des Sciences Economiques, J04111. Université Panthéon-Sorbonne (Paris 1). [Online] at: ftp://mse.univ-paris1.fr/pub/mse/cahiers2004/J04111.pdf (referred on 02/06/2009)

de Souza, L. V. (2002), Trade Effects of Monetary Integration in Large, Mature Economies: A Primer on the European Monetary Union. Kiel Working Papers, 1137. Kiel Institute for the World Economy. [Online] at: http://www.ifw-members.ifw-kiel.de/publications/trade-effects-of-monetary-integration-in-large-mature-economies-a-primer-on-the-european-monetary-union/kap1137.pdf (referred on 08/05/2009)

Emerson, M. et al. (1992), One Market, One Money: An Evaluation of the Potential Benefits and Costs of Forming an Economic and Monetary Union. New York: Oxford University Press.

Eurostat. [Online] at: http://epp.eurostat.ec.europa.eu/ (referred on 03/02/2009)

Faruqee, H. (2004), Measuring the Trade Effects of EMU. IMF Working Papers, 04 (154). International Monetary Fund. [Online] at: http://www.imf.org/external/pubs/ft/wp/2004/wp04154.pdf (referred on 18/03/2009)

Flam, H. & Nordström, H. (2006a), Trade Volume Effects of the Euro: Aggregate and Sector Estimates. Seminar Papers 746. Stockholm University, Institute for International Economic Studies. [Online] at: http://www.iies.su.se/publications/seminarpapers/746.pdf (referred on 08/05/2009)

Flam, H. & Nordström, H. (2006b), Euro Effects on the Intensive and Extensive Margins of Trade. CESifo Working Paper, No. 1881. CESifo GmbH. [Online] at: http://www.cesifo-group.de/DocCIDL/cesifo1_wp1881.pdf (referred on 08/05/2009)

Glick, R. & Rose, A. K. (2001), Does a Currency Union Affect Trade? The Time Series Evidence. NBER Working Papers 8396. National Bureau of Economic Research. [Online] at: http://faculty.haas.berkeley.edu/arose/CUTS.pdf (referred on 30/01/2009)

Indeksi cen življenjskih potrebščin, Slovenija, 2007. (2008), Statistične informacije. (No. 3, 28. January 2008). Ljubljana: SORS.

Mancini-Griffoli, T. & Pauwels, L. L. (2006), Is There a Euro Effect on Trade? An Application of End-of-Sample Structural Break Tests for Panel Data, HEI Working Papers, 04-2006. Economics Section, The Graduate Institute of International Studies. [Online] at: http://heiwww.unige.ch/sections/ec/pdfs/Working_papers/HEIWP04-2006.pdf (referred on 03/04/2009)

Micco, A., Stein E. & Ordoñez G. (2003), “The Currency Union Effect on Trade: Early Evidence From EMU”, Economic Policy, 18 (37) 316-356.

Mongelli, F. P. (2002), 'New' views on the optimum currency area theory: what is EMU telling us? Working Paper Series, 138. European Central Bank. [Online] at: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp138.pdf (referred on 07/02/2009)

Persson, T. (2001), “Currency Unions and Trade: How Large is the Treatment Effect?”, Economic Policy, (33), 435–448.

Quarterly Real Effective Exchange Rates vs (rest of) EUR13. Evropska Komisija (DG ECFIN). [Online] at: http://ec.europa.eu/economy_finance/publications/price-cost-competiteveness/data/qreeur13.xls (referred on 08/12/2008)

Rose, A. K. (2000), “One Money, One Market: The Effect of Common Currencies on Trade”. Economic Policy, 30.

Rose, A. K. & Van Wincoop, R. (2001), National Money as a Barrier to International Trade: The Real Case for Currency Union. [Online] at: http://faculty.haas.berkeley.edu/arose/RvWr.pdf (referred on 05/03/2009)

Rose, A.K. (2004), A Meta-Analysis of the Effect of Common Currencies on International Trade. NBER Working Paper, No. 10373. Cambridge, MA: National Bureau of Economic Research. [Online] at: http://www.nber.org/papers/w10373.pdf (referred on 15/02/2009)

SURS (SORS), nacionalni računi. [Online] at: http://www.stat.si/tema_ekonomsko_nacionalni_bdp.asp (referred on 08/02/2009)

Yi, Kei-Mu. (2003), “Can Vertical Specialization Explain the Growth of World Trade?”, Journal of Political Economy, 111 (1), 52-102.