Euro’s Trade Effect: Homogeneity Versus Heterogeneity in the Euro Zone

Abstract

We used an improved gravitational equation to experiment with as many samples and relevant time intervals as possible -from the most homogeneous samples (EU 15) with shorter periods, to less homogeneous samples (EU 25/27) but with longer periods of time, in order to observe the evolution of the euro trade effect over time, along with the enlargement of the EU and the Euro Zone, thus best estimating the euro trade effect that is to be experienced by Romania when joining the Euro Zone. The result is not surprising: with the inclusion of recent EU and Euro Zone accession waves, the euro trade effect is drastically reduced, so that when Romania and Bulgaria are also introduced into the EU sample, the estimated Rose effect for the euro recorded the lowest values and loses its statistical significance completely.