One Market: The Effect of Common Currencies on Trade

  title={One Market: The Effect of Common Currencies on Trade},
  author={Andrew K. Rose},
  • A. Rose
  • Published 1 April 2000
  • Economics
A gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade. The panel data, bilateral observations for five years during 1970-90 covering 186 countries, includes 300+ observations in which both countries use the same currency. I find a large positive effect of a currency union on international trade, and a small negative effect of exchange rate volatility, even after controlling for a host of features, including the endogenous… 

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