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Currency unions, export margins, and product differentiation: an empirical assessment for European Monetary Union

Badinger, Harald and Türkcan, Kemal (2014) Currency unions, export margins, and product differentiation: an empirical assessment for European Monetary Union. Review of International Economics, 22 (1). pp. 13-30. ISSN 1467-9396

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Abstract

This paper reconsiders the trade effects of the euro, providing a decomposition into its effects on the extensive margin and intensive margin. Furthermore, it relates the more disaggregated estimates for 93 two-digit HS product groups to the elasticity of substitution, thereby testing a key hypothesis of recent trade theory. The estimates for the period 1996-2011 suggest a trade effect of the euro of some 28 percent, which has mainly materialized through the intensive margin. For several product groups, we find a negative net effect of the euro on the extensive margin, supporting anecdotal evidence that firms have consolidated their product varieties in response to the elimination of exchange rate variability. Finally, the disaggregated estimates are in line with recent trade theory, suggesting that a large elasticity of substitution dampens the effect of a trade cost reduction on the extensive margin and amplifies its effect on the intensive margin.

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version requires a subscription. This is the peer reviewed version of the following article, which has been published in final form at http://dx.doi.org/10.1111/roie.12094. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Classification Codes: JEL F12, F14, F15
Divisions: Departments > Volkswirtschaft > Internationale Wirtschaft
Forschungsinstitute > Europafragen
Version of the Document: Accepted for Publication
Depositing User: Gertraud Novotny
Date Deposited: 15 Mar 2017 16:40
Last Modified: 15 Mar 2017 16:55
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/62972/
URI: http://epub.wu.ac.at/id/eprint/5472

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