The authors are indebted to J. LL. Carrión-i-Silvestre and C. Kao for providing them with the Gauss codes to implement some of the tests used in the paper and to A. Banerjee for his useful comments on the paper. The usual disclaimer applies. The authors also acknowledge the financing from Spanish MICINN [project ECO2011-30260-C03-01]. M. Camarero and C. Tamarit are members of INTECO research group funded by Generalitat Valenciana, project PROMETEO/2009/098. Finally, the authors would like to thank Juliette Milgram, Josep Lluis Carrión-i-Silvestre, Diego Romero de Avila, Anindya Banerjee, Ana Moro and Rafael Llorca for their useful comments on previous versions of this paper.
Version of Record online: 26 JUN 2013
© 2013 John Wiley & Sons Ltd
The World Economy
Volume 36, Issue 9, pages 1146–1164, September 2013
How to Cite
Camarero, M., Gómez, E. and Tamarit, C. (2013), EMU and Trade Revisited: Long-Run Evidence Using Gravity Equations. World Economy, 36: 1146–1164. doi: 10.1111/twec.12090
- Issue online: 6 SEP 2013
- Version of Record online: 26 JUN 2013
In this paper, we present evidence of the long-run effect of the euro on trade for the twelve initial EMU countries for the period 1967–2008 from a double perspective. First, we pool all the bilateral combinations of trade flows among the EMU countries in a panel cointegration gravity specification. Second, we estimate a gravity equation for each of the EMU members vis-à-vis the other eleven partners. We apply panel cointegration techniques based on factor models that account for cross-dependence and structural breaks. Whereas the joint gravity equation provides evidence on the aggregate effect of the euro on intra-European trade, by isolating the individual countries, we assess which of the member countries have obtained a larger benefit from the euro. The results show that the euro has had a positive though small effect on trade. Belgium and Luxembourg, France and Italy are the countries more benefited from the introduction of the euro. The effects for exports to third countries are in general more moderate, and, with the exception of Greece, there is no evidence of diversion effects.