Trade Effects of Currency Unions : Do Economic Dissimilarities Matter?

This paper provides a general equilibrium analysis of the trade effects of the formation of a currency union, and of its subsequent enlargement to include an economically dissimilar country. Furthermore, it investigates how economic dissimilarities among countries affect the magnitude of the trade effects fostered by a common currency. We show that sharing a common currency enhances the volume of bilateral trade among countries. However, the more economically dissimilar is an accession country, compared to the original members of a currency union, the smaller are the gains in trade that would follow the enlargement of a currency union.
Publication date: October 2008
ISBN: 9781451871074
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International - Economics , Globalization , Currency Union , Enlargement , Economic Dissimilarities , Intra-industry Trade , bilateral trade , trade costs , member country , trade effects , patterns of trade

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