Stylized Facts on Bilateral Trade and Currency Unions: Implications for Africa

Author/Editor:

Michal Hulej ; Charalambos G Tsangarides ; Pierre Ewenczyk

Publication Date:

January 1, 2006

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper explores and quantifies several aspects of the performance of currency unions using an augmented version of the gravity model and focusing on two samples, the world and Africa. Our empirical findings suggest that, in principle, membership in a currency union should benefit Africa as much as it does the rest of the world. In addition, we find evidence from both samples that the effect of currency unions on trade is large, almost a doubling; currency unions are associated with trade creation, increase price co-movements among members, and make trade more stable; and longer duration of currency union membership brings about more benefits, although with some diminishing returns.

Series:

Working Paper No. 2006/031

Subject:

Currencies Gravity models Labor unions Monetary unions Plurilateral trade

English

Publication Date:

January 1, 2006

ISBN/ISSN:

9781451862911/1018-5941

Stock No:

WPIEA2006031

Pages:

37

Please address any questions about this title to publications@imf.org