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Unpublished Paper
Disaggregated trade and disaggregated currency unions: a ranking of common currency effects
Working papers (2015)
  • Gregory William WHITTEN, Lingnan University, Hong Kong
Abstract
Andrew Rose has long argued that a common currency has a large effect on increasing trade.  Recently, Rose has called into question the reliability of this conclusion, as new techniques have emerged for estimating gravity equations.  This paper uses the sector-specific gravity model developed by Anderson & Yotov (2010) to investigate if disaggregated trade can provide a reliable estimate of a common currency's effect.  Disaggregating trade alone is insufficient to obtain a reliable estimate of a currency union, regardless of econometric technique, when the effect of a common currency on trade is uniform across all unions.  Disaggregating the universe of currency unions with individual effects provides a reliable ranking of currency unions, independent of estimation method, by the effect that each union's currency has on increasing trade.  These rankings differ across sectors.
Keywords
  • Gravity Equation,
  • Domestic policy analysis,
  • Non-Tariff barriers,
  • Preferential trading arrangements,
  • Trade in textiles and wearing apparel,
  • Currency Unions,
  • Africa,
  • Caribbean,
  • Europe
Publication Date
December, 2015
Citation Information
Whitten, G. (2014). Sector-specific bilateral trade and currency unions. Unpublished manuscript. Available at: http://works.bepress.com/gregory_whitten/2