The effects of the European Economic and Monetary Union (EMU) and European Union (EU) on trade are separately estimated using an empirical gravity model. Employing a panel approach with both time-varying country and dyadic fixed effects on a large span of data (across both countries and time), it is found that EMU and EU each significantly boosted exports. EMU expanded European trade by 40% for the original members, while the EU increased trade by almost 70%. Newer members have experienced even higher trade as a result of joining the EU, but more time is necessary to see the effects of their joining EMU.
About the Author
Reuven Glick is an Economist Emeritus and former Group Vice President of International Research in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Reuven Glick