Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 22, 2019 erstellt
Description:
Estimating the currency union effect on trade has been a contentious topic, with a wide range of estimates on the true size of gains. One fundamental issue underlying many estimates is the lack of a accurate control group against which to compare outcomes, making it hard to understand the degree to which makes existing estimates even harder to interpret from the perspective of policy makers. Estimates of gains within the eurozone tend to be smaller, while the sovereign debt crisis in Europe caused many to question the long term viability of the union. It is crucial for the public debate over the costs and benefits of eurozone membership to bring more clarity to our understanding of the benefits from trade that such a union provides to its members. I propose a novel approach to this literature that applies inverse propensity score weighting as well as local projections to study both the traditional static estimates of trade as well as forecasts of the effect of currency unions on trade over time. I find that the static effect of currency unions on trade are in general still quite large for currency unions in general, but quite small for the emu. However, I find the puzzling result that the currency union effect on trade for the euro declined over the period from implementation until the recession in 2008. Since the expected effect should be fixed over time this suggests a deeper understanding of the simultaneous policy changes that take place over the period that may bias static effects upwards