Trade implications of the Euro in EMU countries: a panel gravity analysis

Kunroo, Mohd Hussain; Sofi, Irfan Ahmad; Azad, Naushad Ali

doi:10.1007/s10663-016-9334-6

Cited by 13 publications

(8 citation statements)

References 55 publications

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“…This relationship can be elaborated further by looking at the sign and significance of the PCGDP D variable (the absolute difference of per capita GDP between a pair of countries) because it helps us to identify the type of trade that takes place among these euro club countries. A positive sign for this variable suggests that trade in these countries is based on comparative advantage, which lends support to the inter-industry trade type; while a negative sign shows that these economies feature intra-industry trade patterns (Kunroo, Sofi, & Azad, 2016; Rault, Sova, & Sova, 2009). This, in turn, invokes the classical Ricardian theory—countries with different factor endowments and thus, in comparative advantages, would exchange more goods of an inter-industry nature.…”

Section: The Econometric Modelmentioning

confidence: 78%

“…Since all the economies in our sample data set belong to the euro currency union, one implication of this finding is that if currency unions create trade (Kunroo et al, 2016; Kunroo, Sofi, Khurana, & Mogha, 2017), and trade increases cycle correlation, then perhaps countries should not be as concerned with an ex ante lack of business cycle correlation when deciding whether to enter a currency union. Entry may result in more highly correlated business cycles.…”

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confidence: 95%

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Trade, Industrial Dissimilarity, FDI and Business Cycle Co-movements: EC3SLS Evidence from Eurozone Economies

Kunroo¹

2019

Margin: The Journal of Applied Economic Research

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This article uses simultaneous equations error component three-stage least squares (EC3SLS) panel data technique to find the direct and indirect impacts of trade, industrial dissimilarity and FDI on the business cycle synchronisation of Eurozone economies. The period of analysis is 1990–2009. These are the major findings: (a) trade, industrial dissimilarity and FDI have both direct and indirect effects on the business cycle synchronisation of sample economies; (b) EC3SLS estimates show that closer trade ties among these Eurozone countries have led to more synchronised business cycle co-movements, because common disturbances are more prevalent and intra-industry trade dominates; (c) the bilateral FDI flows have served as a source of destabilisation rather than a source of synchronisation; (d) industry-specific shocks have almost lost their importance both in terms of generating more trade and in terms of raising the output correlation of sample countries; (e) trade intensity and FDI flows are positively and significantly correlated, thereby suggesting that more FDI encourages more trade and vice-versa; (f) trade shows a negative relationship with industrial dissimilarity, which implies that bilateral trade in these countries promotes similar industrial structures; and finally, (g) these economies characterise intra-industry trade patterns, as expected in the case of these highly integrated Eurozone economies. Although the results show the presence of intra-industry trade types, these economies have diversified their production processes at the higher income levels. JEL: E32, F02, F10, F11, F15, C33

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Section: The Econometric Modelmentioning

confidence: 78%

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confidence: 95%

Trade, Industrial Dissimilarity, FDI and Business Cycle Co-movements: EC3SLS Evidence from Eurozone Economies

Kunroo¹

2019

Margin: The Journal of Applied Economic Research

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“…An extensive body of literature exists on the affect euro on the economy (Moździerz, 2019). Kunroo et al (2016) showed that the euro can cause economic convergence among Eurozone countries through intra-industry trade. The euro has also affected foreign direct investment (FDI).…”

Section: Literature Reviewmentioning

confidence: 99%

Wage convergence after euro adoption - the case of Slovakia

Kotliński¹

2021

JESI

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According to the theory of integration, welfare increase is the long-term indirect effect of joining the euro area. Monetary integration accelerates the processes of economic convergence, including income convergence, which is particularly desired by the societies of catching-up economies. This process is crucial for increasing the long term potential for macroeconomic sustainable growth of the economy. The countries of the Visegrad Group are institutionally and structurally similar. But only Slovak Republik adopted euro in 2009, another Visegrad countries stay by their own currencies. So it is a good opportunity to assess the effects of joining the euro zone on wage growth in the medium term through a comparative analysis. The aim of the research is to assess the impact of joining the euro area on the wage growth rate in Slovakia. The research was carried out using the comparative method. Three types of convergence are taken into account: beta, sigma and gamma. An extension of the implementation of the concept of beta, sigma and gamma convergence is the estimation for variables other than GDP, i.e. for the wage growth rate. The analysis covers the 2009-2019 period. The study confirms the existence of beta and sigma convergence. The convergence of earnings between EU countries occurs, wages in less developed CEE countries, tend to grow faster than do in wealthier ones. On the other hand, no gamma convergence was found. The higher rate of wage growth in Slovakia as compared to other countries of the Visegrad group was also not confirmed.

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“…In addition, Sousa (2012) demonstrated that the impact of the currency union on trade, even though positive, is decreasing over time. Kunroo et al (2016) showed that the euro can cause economic convergence among Eurozone countries through intra-industry trade. The euro has also affected foreign direct investment (FDI).…”

Section: Literature Reviewmentioning

confidence: 99%

Has the Euro Promoted Eurozone’s Growth?

Ioannatos¹

2018

Journal of Economic Integration

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Trade implications of the Euro in EMU countries: a panel gravity analysis

Cited by 13 publications

References 55 publications

Trade, Industrial Dissimilarity, FDI and Business Cycle Co-movements: EC3SLS Evidence from Eurozone Economies

Trade, Industrial Dissimilarity, FDI and Business Cycle Co-movements: EC3SLS Evidence from Eurozone Economies

Wage convergence after euro adoption - the case of Slovakia

Has the Euro Promoted Eurozone’s Growth?

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