Date of Award
Master of Arts (MA)
Dr. Catherine Co
The decision of a preferential trading agreement (PTA) to form a currency union adds a new dimension to the debate over whether PTA’s are a step forward or backwards in the quest for world wide free trade. This paper looks at the effects the introduction of the euro has had on trade within the European Union (EU). Using trade data for the twenty-three industrialized countries as classified by the International Monetary Fund, ordinary least-squares was applied to a gravity model of bilateral trade. Independent variables included: gross domestic product (GDP), per capita GDP, a distance measure, adjacency, common language, membership in the EU, and membership in the euro-zone. Parameter estimates show that membership in the Euro-zone increased trade nearly one and a half times over nonmembers. Tests on data from subsequent years will be needed before definite conclusions can be reached, but these initial results are consistent with other researchers.
Clark, Paul M., "The Effects of a Currency Union on Trade: The Case of the Euro-System" (2001). Student Work. 1857.