Joakim Gullstrand () and Karin Olofsdotter ()
Joakim Gullstrand: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Karin Olofsdotter: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
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.
23 pages, September 12, 2014
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