Erschienen in:Banque de France Working Paper ; No. 856
Umfang:
1 Online-Ressource (63 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.4028512
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 2021 erstellt
Beschreibung:
I rely on a historical natural experiment to provide, for the first time, a causal estimate of the effect of currency unions on international trade. Since the seminal paper by Rose (2000), a large literature has developed around currencies as a trade cost. However, self-selection and endogeneity bias implied by membership of a currency union are likely to be pervasive and might explain the large pro-trade effect of currency union found in the literature. I offer a quasi-experimental contribution by exploiting an exogenous variation in currency union membership, driven by an unexpected geopolitical shock – the 1861 Italian unification - and involving a French franc pan-European zone that existed throughout the 19th century. I employ original data and structural gravity equations to estimate an effect in the order of 35%, consistent with a large - if heterogenous - effect of common currencies on trade