DP4341 A Meta-Analysis of the Effect of Common Currencies on International Trade

Author(s): Andrew K Rose
Publication Date: April 2003
Keyword(s): estimate, literature, monetary, regression, study, test, union
JEL(s): F34
Programme Areas: International Macroeconomics, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4341

34 recent studies have investigated the effect of currency union on trade, resulting in 754 point estimates of the effect. This Paper is a quantitative attempt to summarize the current state of debate; meta-analysis is used to combine the disparate estimates. The chief findings are that: a) the hypothesis that there is no effect of currency union on trade can be rejected at standard significance levels; b) the combined estimate implies that a bilateral currency union increases trade by between 30% and 90%; and c) the estimates are heterogeneous and not consistently tied to most features of the studies.