Friends without benefits? New EMU members and the “Euro Effect” on trade

Abstract

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The euro's effect on trade: an analysis of "old" and "new" EMU members

“…Anticipating our results, we show a statistically non-significant euro's effect on trade. Our results are consistent with a number of recent studies (Larch et al, 2019;Mika and Zymek, 2018;Ciéslik et al, 2012Ciéslik et al, , 2014 which focus on samples covering a large number of countries. However, disaggregating the effect, we report a relatively large euro's effect on trade of between 49-60 percent of bilateral exports for the "new" EMU member.…”

“…To the best of our knowledge, the present paper is one of the few studies that disaggregate the euro's effect by identifying different effects associated to the trade flows involving "old" and "new" EMU member countries. The other existing recent works (Zymek et al, 2018;Larch et al, 2019;Ciéslik et al, 2014) do not include Latvia and Lithuania in the EMU estimates. Furthermore, differently, from Ciéslik et al 2014, we use the PPML estimator in our empirical strategy.…”

Have export compositions influenced economic growth of the European Union countries in Central and Eastern Europe?

“…Moreover, the EMU that has facilitated the use of the euro in seven CEE countries has expanded their trade flows with eurozone countries. As expected, the EMU substantially promoted trade flows among eurozone countries during 2000-2013 (Mikaa and Zymekb, 2018). Since the eurozone and non-eurozone CEE countries have established closer trade ties with western EU countries, their inclusion in this study would provide more accurate analysis of the export composition effect on economic growth.…”

“…Moreover, the EU has allowed the CEE countries to have greater access to the entire EU markets for their fuel exports. The adoption of the euro has further expanded their trade flows with other eurozone countries because of the elimination of exchange rate volatility (Mikaa and Zymekb, 2018). The drop in fuel export prices has further boosted their competitiveness in western EU countries.…”

“…This suggests that the trade concentration in the raw material and manufactured exports has promoted CEE growth after EU accession. The adoption of the euro has also boosted the intra-trade flows among the member countries during 2002-2013 (Mikaa and Zymekb, 2018). The CEE countries have expanded their market shares in the western EU countries as their differentiated manufactured exports have become more competitive in these markets (Kali, Mendez, and Reyes, 2007).…”