Advanced

The Euro Effect on Bystanders

Gullstrand, Joakim LU and Olofsdotter, Karin LU (2014) In Working Paper / Department of Economics, School of Economics and Management, Lund University
Abstract
This paper investigates trade effects of the euro focusing on the impact on bystanders. A common currency is expected to lower both variable and fixed trade costs, inducing increased trade flows between currency-union members on both intensive and extensive margins of trade. While this trade-creating effect has gained attention in recent work using firm-level data, few studies have looked on the possible trade-diverting effect for firms remaining outside. In this paper, we use data for Swedish manufacturing firms covering the 1997-2006 period in order to assess the potential trade-diverting effects of the euro on Swedish exports. We consider variations in the impact of the euro taking both firm, industry and export-market characteristics... (More)
This paper investigates trade effects of the euro focusing on the impact on bystanders. A common currency is expected to lower both variable and fixed trade costs, inducing increased trade flows between currency-union members on both intensive and extensive margins of trade. While this trade-creating effect has gained attention in recent work using firm-level data, few studies have looked on the possible trade-diverting effect for firms remaining outside. In this paper, we use data for Swedish manufacturing firms covering the 1997-2006 period in order to assess the potential trade-diverting effects of the euro on Swedish exports. We consider variations in the impact of the euro taking both firm, industry and export-market characteristics into account. Our results suggest that there are some trade-diverting effects on the intensive margin but that these negative effects of the euro on trade flows are asymmetric and only valid for core markets within the Eurozone. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
euro, trade diversion, exports, heterogeneous firms
in
Working Paper / Department of Economics, School of Economics and Management, Lund University
issue
33
pages
23 pages
publisher
Department of Economics, Lund Universtiy
language
English
LU publication?
yes
id
c7f7b308-9301-4edc-8d8a-f827fbd26c6d (old id 4698343)
alternative location
https://ideas.repec.org/p/hhs/lunewp/2014_033.html
http://project.nek.lu.se/publications/workpap/papers/wp14_33.pdf
date added to LUP
2014-10-16 16:21:48
date last changed
2016-04-16 10:15:22
@misc{c7f7b308-9301-4edc-8d8a-f827fbd26c6d,
  abstract     = {This paper investigates trade effects of the euro focusing on the impact on bystanders. A common currency is expected to lower both variable and fixed trade costs, inducing increased trade flows between currency-union members on both intensive and extensive margins of trade. While this trade-creating effect has gained attention in recent work using firm-level data, few studies have looked on the possible trade-diverting effect for firms remaining outside. In this paper, we use data for Swedish manufacturing firms covering the 1997-2006 period in order to assess the potential trade-diverting effects of the euro on Swedish exports. We consider variations in the impact of the euro taking both firm, industry and export-market characteristics into account. Our results suggest that there are some trade-diverting effects on the intensive margin but that these negative effects of the euro on trade flows are asymmetric and only valid for core markets within the Eurozone.},
  author       = {Gullstrand, Joakim and Olofsdotter, Karin},
  keyword      = {euro,trade diversion,exports,heterogeneous firms},
  language     = {eng},
  note         = {Working Paper},
  number       = {33},
  pages        = {23},
  publisher    = {Department of Economics, Lund Universtiy},
  series       = {Working Paper / Department of Economics, School of Economics and Management, Lund University},
  title        = {The Euro Effect on Bystanders},
  year         = {2014},
}