## _wp10226

## Source details

**Canonical URL:** [_wp10226](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp10226.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp10226.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp10226.pdf.json)

---

### I. Introduction
- Context and motivation:
  - Large bilateral trade imbalances have risen sizably and increasingly dominate overall trade balances (examples: U.S.–China, Italy–Germany).
  - Illustrative numbers: the trade deficit between the United States and China increased from virtually zero in the mid 1980s to more than 225 billion US dollars in 2009, accounting for almost one half of the U.S. total trade deficit; for Italy, the trade deficit with Germany rose by a factor of 5 within a decade and now exceeds Italy’s overall deficit in external trade.
- Conceptual concerns:
  - Large and persistent bilateral imbalances viewed as evidence of rigidities or distortions (protectionism, distortionary policies delaying external adjustment, fixed or managed exchange rates slowing real exchange rate corrections).
  - Lack of an adjustable nominal exchange rate posed as a problem in a currency union (e.g., euro area) where nominal rates are permanently fixed.
- Empirical preview and main results:
  - Trade imbalances—measured as the fraction of deficits and surpluses in total bilateral trade—have widened considerably between euro area member countries after the introduction of the euro.
  - Controlling for country-specific and pair-wise fixed effects indicates larger imbalances are not (only) due to enduring asymmetries in trade competitiveness between a given pair or to changes in institutional framework, financing conditions, or trends in competitiveness of specific countries against all others.
  - Intra-euro area imbalances have become more persistent; persistence can be partially linked to labor market inflexibility.
- Determinants summarized:
  - Bilateral trade surpluses are:
    - decreasing in the real exchange rate,
    - decreasing in growth differentials,
    - increasing in the relative volatility of national business cycles.
  - Countries with relatively higher fiscal deficits and less flexible labor and product markets exhibit systematically lower trade surpluses.
  - Many of these effects are particularly developed among euro area member countries.
- Policy implication summary:
  - Permanently fixed nominal exchange rates can produce large and lasting trade imbalances.
  - These imbalances can be addressed through structural and macroeconomic policies.

### II. Stylized patterns of bilateral trade imbalances
- Distributional patterns:
  - Sample average trade imbalance consistently exceeds the median imbalance, indicating domination by a few large bilateral imbalances (notably Iceland, Ireland, Greece).
  - Median and mean imbalances display a U-shaped pattern over time: relatively large imbalances in the Bretton Woods era, moderate imbalances in the 1970s and 1980s, and renewed increases since the mid-1990s.
  - U-shaped pattern strongest for trade between EMU member countries; trade between non-members displays no clear tendency.
  - For most EMU countries, the spread between the largest bilateral trade surplus and deficit with a non-member has increased in recent years, suggesting growing divergence in trade competitiveness.

### III. Regression evidence on exchange rate regimes and imbalances
- Baseline EMU effect:
  - Baseline regression of absolute bilateral trade imbalances on an EMU membership dummy with year fixed effects:
    - Estimated β on EMU ≈ 0.018; t-statistic = 2.1; statistically different from zero at the 5 percent level.
    - Interpretation: trade imbalances between euro area member countries about 2 percentage points larger than for the rest of the sample.
  - Adding pair-wise fixed effects:
    - EMU coefficient ≈ 0.033 (almost doubles); implies increase in bilateral trade imbalances among euro members by an average of more than 3 percentage points since adoption of the euro.
    - Comparison: sample mean of about 0.3.
  - EMU effect remains positive, statistically highly significant, and economically sizable when controlling for time-variant country-specific features.
- Other fixed exchange rate regimes:
  - Other fixed exchange rate dummy positive and significant with only time fixed effects (possible post-World War II influence).
  - Falls in magnitude and becomes statistically indistinguishable from zero after pair-wise fixed effects; may change sign (insignificant) with country time fixed effects.

### IV. Exchange rate volatility and nonlinearities
- Volatility measures:
  - Annual standard deviation of monthly nominal exchange rates and categorical dummies for degrees of nominal variability used.
- Findings:
  - With only year fixed effects, exchange rate volatility and trade imbalances positively related.
  - With country fixed effects, bilateral imbalances decrease in nominal exchange rate variability (expected negative relationship).
  - The euro’s effect on trade imbalances largely unaffected by inclusion of volatility measures.
  - Evidence of nonlinear effects:
    - Moderate nominal exchange rate adjustments have the smallest coefficients.
    - Coefficients increase in magnitude for larger exchange rate changes, consistent with a nonlinear effect.

### V. Macroeconomic determinants of trade surpluses/deficits
- Real exchange rate:
  - Definition: RER_rpt = ER_prt × CPI_rt / CPI_pt.
  - Real appreciation (higher lagged RER) associated with deterioration of trade balances.
  - For mostly fixed exchange rate periods (Bretton Woods 1949–1973; 1999–2009; 1973–mid-1980s "currency snake"), log RER coefficient negative and highly significant.
  - Magnitude: a one-percent increase in the real exchange rate leads to a reduction in the trade balance of about 4 to 5 percentage points (across these sub-periods).
  - Exception: 1984–1998 shows an unexpectedly positive sign (affected by the 1992 ERM crisis period).
- Relative output growth:
  - Higher relative output growth typically associated with lower bilateral trade surpluses or higher deficits.
  - EMU-only estimate = -0.05: an increase in a country’s growth advantage by one percent associated with a decrease in its bilateral trade balance by about 5 percentage points.
- Business cycle volatility:
  - Proxy: standard deviation of annual real GDP growth over a centered 9-year period.
  - Positive coefficient estimates: countries with relatively lower growth volatility tend to exhibit lower trade surpluses or higher deficits; effect amplified by euro area membership.
  - Magnitude: an increase in the difference in standard deviations by one associated with an increase in the trade balance by about 9 percentage points.
- Fiscal balances (“twin deficits”):
  - Higher fiscal deficits associated with more negative external positions at statistically and economically significant levels.
  - Among euro area members, a one percentage point increase in the (relative) fiscal balance is associated with an improvement in the bilateral trade balance by about two percentage points.
- Selected reported coefficients (Table excerpts):
  - Log real exchange rate coefficients: 0.025; -0.048; -0.044; 0.053; -0.037; -0.005 (robust standard errors reported in source).
  - Log real effective exchange rate reporter: -0.115 (0.026).
  - Log real effective exchange rate partner: 0.190 (0.027).
  - De-meaned real GDP growth differential: 0.001 (0.004); -0.052 (0.004).
  - De-meaned real GDP growth differential × EMU: -0.008 (0.006).

### VI. Market institutions and regulation
- OECD regulation indices (0 = least restrictions to 6 = most restrictions) used for product and labor market regulation.
- Findings:
  - Higher relative labor or product market flexibility associated with higher bilateral trade surpluses (or lower deficits); association stronger over time and especially among euro-area pairs.
  - Majority of econometric evidence: higher relative levels of regulation associated with lower trade balance surpluses or higher deficits; effect particularly strong among euro area members.
  - Out of 30 estimated coefficients for ten regulatory indicators: 24 coefficients take a negative sign, 16 of which are statistically different from zero (at least at the 5 percent level).
- Selected institutional coefficient highlights (Table 5):
  - Employment protection: Coeff. -0.303 (Full sample); EMU Coeff. -0.230; number of obs. 5,060 and 864; Adj. R2 0.91 and 0.98; robust se (0.014) and (0.008).
  - Product market regulation: Coeff. -0.699; EMU -0.477; number of obs. 720 and 180; Adj. R2 0.95 and 0.99; robust se (0.097) and (0.076).
  - Barriers to entrepreneurship: Coeff. -0.236; EMU -0.600; robust se (0.048); (0.056).
  - Selected other entries reported with robust standard errors in the source.

### VII. Persistence of bilateral trade imbalances
- Evidence from panel regressions with lagged dependent variable:
  - Strong persistence: autoregressive coefficient ≈ 0.68; highly statistically significant.
  - Persistence higher for EMU countries:
    - Interaction of lagged dependent variable with EMU membership positive, highly significant, and economically large.
    - Degree of persistence in intra-euro area imbalances about 25 percent higher than elsewhere → autoregressive coefficient ≈ 0.83 for EMU members.
  - With this extension, the non-interacted EMU dummy becomes significantly negative, suggesting the disproportionately large bilateral imbalances under EMU are linked to greater persistence.
  - Result does not extend to other fixed exchange rates.
- Role of market institutions in persistence (Tables 7):
  - Higher average employment protection associated with greater persistence among euro area countries.
  - Estimated effect: autoregressive coefficient increases by about 0.09 for each unit increase in the pair-wise average OECD employment regulation measure (range 1 to 6).
  - Illustrative comparison: reducing employment protection from the sample mean of 2.4 to the sample low of 0.8 would reduce persistence by about 0.15, ceteris paribus — equivalent to the deviation of EMU persistence from the sample average.
- Selected persistence coefficients (Table 6 and Table 7 excerpts):
  - Lagged trade imbalance coefficients: 0.675; 0.677; 0.734; 0.735 (robust se (0.009); (0.010); (0.013); (0.013)).
  - Lagged trade imbalance × EMU: 0.159; 0.171; 0.076; 0.077 (robust se (0.018); (0.019); (0.017); (0.017)).
  - EMU coefficients: -0.040; -0.044 (robust se (0.010); (0.010)).
  - Average employment protection: 0.100; 0.100; 0.054 (robust se (0.017); (0.013); (0.013)).
  - Lagged trade imbalance × Average employment protection × EMU: 0.012; 0.088 (robust se (0.007); (0.024)).

### VIII. Key quantitative findings (selected)
- EMU dummy estimate (year fixed effects): 0.018; t-statistic = 2.1; significant at 5 percent → ~2 percentage points larger imbalances.
- EMU dummy with pair-wise fixed effects: 0.033 → >3 percentage points increase since adoption of the euro.
- Sample mean of bilateral imbalance: about 0.3.
- Real exchange rate elasticity: 1% real appreciation → ~4 to 5 percentage points reduction in trade balance.
- EMU-only growth differential estimate: -0.05 → 1% growth advantage → ~5 percentage points deterioration in bilateral trade balance.
- Business cycle volatility effect: difference in standard deviations +1 → trade balance +9 percentage points.
- Fiscal balance effect (EMU members): +1 percentage point fiscal balance → trade balance improvement ≈ 2 percentage points.
- Persistence (autoregressive coefficient): overall ≈ 0.68; intra-EMU ≈ 0.83.
- Employment protection effect on persistence: +0.09 in autoregressive coefficient per unit increase in average employment protection (index range 1–6).
- Regulatory indicators: 24 of 30 coefficients negative; 16 statistically significant at least at the 5 percent level.

### IX. Policy implications and recommendations
- Fixed nominal exchange rates are associated with larger and more persistent bilateral trade imbalances.
- Structural and policy measures can mitigate imbalances despite fixed exchange rates:
  - Increase labor market flexibility and reduce product market rigidities to lower the size and persistence of imbalances.
  - Structural reforms that smooth the business cycle (e.g., policies increasing domestic-demand contributions to growth in very open trade surplus economies) can reduce precautionary savings and lower trade surpluses.
  - Fiscal consolidation (improving fiscal balances) is likely to help reduce large trade deficits.
- Nonlinearity caution: moderate nominal exchange rate adjustments may affect imbalances differently than larger adjustments; policy design should account for potential nonlinearities in exchange rate effects.
- Institutional reforms in EMU members (labor and product market flexibility) are especially important given higher persistence and larger imbalances observed within the euro area.

### X. Data and variables (appendix summary)
- Sample: homogeneous set of 18 European countries (the 15 countries which were EU members at the time of euro introduction plus Iceland, Norway and Switzerland).
- Time period analyzed: 1948 through 2008.
- Primary data source: IMF Direction of Trade Statistics — nominal values of bilateral exports and imports on an annual basis.
- Key variables and sources:
  - Trade balance = (Exports − Imports)/(Exports + Imports). Source: IMF Direction of Trade Statistics. Period: 1948-2008.
  - Exchange rate volatility: standard deviation of monthly bilateral nominal exchange rate. Source: IMF International Financial Statistics. Period: 1948-2008.
  - EMU: dummy for common membership in euro area (time-variant). Period: 1948-2008.
  - Real exchange rate: pr × CPI_r / CPI_p. Source: IMF International Financial Statistics. Coverage: 1948-2008.
  - Real effective exchange rate: Index (2005=100), based on relative consumer prices. Source: IMF International Financial Statistics. Coverage: 1975-2008.
  - De-meaned real GDP growth: deviation from average growth in previous 4 years. Source: IMF International Financial Statistics. Coverage: 1948-2008.
  - Real GDP growth volatility: standard deviation of real GDP growth over period of 4 years before and after a given year. Source: IMF International Financial Statistics. Coverage: 1948-2008.
  - Budget balance (% GDP): general government balance/GDP. Source: IMF International Financial Statistics. Coverage: 1960-2008.
  - Labor market regulation indicators (OECD): Employment protection, Regular employment, Temporary employment, Collective dismissal. Coverage: 1985-2008 (Collective dismissal 1998-2008).
  - Product market regulation indicators (OECD): Product market regulation and sub-indicators. Years: 1998, 2003, 2008.

*Source: _wp10226 (IMF working paper excerpt).*

### References .............................................................................................................

### _wp10226 - References

### I. INTRODUCTION
- Context and motivation:
  - Large bilateral trade imbalances have risen sizably for many countries and increasingly dominate overall trade balances (examples given from the sample: U.S.–China, Italy–Germany).
  - Illustrative numbers: the trade deficit between the United States and China increased from virtually zero in the mid 1980s to more than 225 billion US dollars in 2009, accounting for almost one half of the U.S. total trade deficit; for Italy, the trade deficit with Germany rose by a factor of 5 within a decade and now exceeds Italy’s overall deficit in external trade.
- Conceptual concerns:
  - Large and persistent bilateral imbalances are often viewed as evidence of underlying rigidities or distortions (e.g., protectionism, distortionary policies delaying external adjustment, fixed or managed exchange rates slowing real exchange rate corrections).
  - The lack of an adjustable nominal exchange rate is posed as a particular problem within a currency union (e.g., the euro area) where nominal rates are permanently fixed and real exchange rate adjustment must operate through relative price levels.
- Empirical preview and main results:
  - Trade imbalances—measured as the fraction of deficits and surpluses in total bilateral trade—have widened considerably between euro area member countries after the introduction of the euro.
  - Controlling for country-specific and pair-wise fixed effects indicates larger imbalances are not (only) due to enduring asymmetries in trade competitiveness between a given pair or to changes in institutional framework, financing conditions, or trends in competitiveness of specific countries against all others.
  - Intra-euro area imbalances have become more persistent; persistence can be partially linked to labor market inflexibility.
- Determinants summarized:
  - Bilateral trade surpluses are:
    - decreasing in the real exchange rate,
    - decreasing in growth differentials,
    - increasing in the relative volatility of national business cycles.
  - Countries with relatively higher fiscal deficits and less flexible labor and product markets exhibit systematically lower trade surpluses.
  - Many of these effects are particularly developed among euro area member countries.
- Policy implication summary:
  - Permanently fixed nominal exchange rates can produce large and lasting trade imbalances.
  - These imbalances can be addressed through structural and macroeconomic policies.

### II. RELATED LITERATURE
- Exchange rate flexibility and current account adjustment:
  - Friedman (1953) argued flexible exchange rates facilitate rapid external adjustment.
  - Empirical evidence is mixed:
    - Chinn and Wei (2008) find no robust evidence that current account persistence depends on exchange rate regime.
    - Ghosh, Terrones and Zettelmeyer (2008) argue nominal exchange rate flexibility facilitates adjustment of real rates and trade flows, possibly nonlinearly.
  - Relationship between real exchange rate and trade questioned by Rose (1990) and supported by Debelle and Faruqee (1990) and Lane and Milesi-Ferretti (2002).
- Euro introduction as a natural experiment:
  - Early literature suggests abolition of nominal exchange rate volatility promoted intra-euro area trade (Rose, 2000; Faruqee, 2004; Baldwin, 2006), but pre-existing high intra-area trade complicates inference.
  - Berger and Nitsch (2008) argue the common currency added little to the pre-existing trend of increasing trade intensity among euro area members.
  - Ahearne, Schmitz and von Hagen (2007) and Schmitz and von Hagen (2009) find increased heterogeneity of intra-euro area current account and trade balances since 1999.
  - Evidence that bilateral trade balances within the euro area became more dispersed than extra-area balances; dispersion trending upward prior to the euro (European Commission 2009, 2010).
  - Decressin and Stavrev (2009) observe growing persistence of current account surpluses and deficits of euro area countries exceeding that of other advanced economies, predating the euro.
- Structural factors and persistence:
  - Blanchard (2007): structural characteristics of goods, labor, and financial markets affect a country’s current account.
  - Schmitz and von Hagen (2009): financial integration increased with the euro, enabling higher current account and trade imbalances; elasticity of within-area trade balances to per capita GDP increased with the euro.
  - Ca’Zirzi and Rubaszek (2008): expectations of real income convergence and consumption smoothing explain current account patterns in the euro area.
  - Ju and Wei (2007): labor market rigidities slow adjustment of current accounts by impeding production-structure shifts between tradables and nontradables.
  - Kennedy and Sløk (2005): persistence of current account imbalances linked to market rigidities, but isolating robust links is difficult.
  - Zemanek, Belke and Schnabl (2010) and Biroli, Mouree, and Turrini (2010): regulation affecting price and nominal wage flexibility and employment protection influence real exchange rate adjustment.
- Macroeconomic determinants:
  - Standard import demand model links trade balance to real exchange rate and income differences (Goldstein and Khan, 1985).
  - Abbas, Bouhga-Hagbe, Fatás, Mauro and Velloso (2010) show fiscal adjustments affect current account, particularly in emerging economies.
  - Mody and Ohnesorge (2010) and Fogli and Perri (2010) discuss the impact of business cycle volatility on savings and current account balances.
- Contribution of this paper:
  - Focus on European monetary integration as a natural experiment.
  - Detailed analysis of bilateral trade relations (rather than aggregate trade/current account).
  - Use of a comparatively long sample and varied empirical settings to examine determinants of trade imbalances.

### III. METHODOLOGY AND DATA
- Variable of interest:
  - Bilateral trade balance between reporter country r and partner country p in year t defined and normalized as:
    - TradeBalance_rpt = (Exports_rpt – Imports_rpt) / (Exports_rpt + Imports_rpt).
  - Normalizing by total bilateral trade highlights symmetry of trade relations; larger magnitudes indicate greater imbalances.
- Empirical specifications:
  - Baseline specification for effect of EMU membership on absolute imbalances:
    - |TradeBalance_rpt| = α + β EMU_rpt {+ Σ_t φ_t T_t} {+ Σ_rp φ_rp RP_rp} {+ Σ_rt φ_rt R_rt} {+ Σ_pt φ_pt P_pt} + ε_rpt,
      - where EMU_rpt = 1 if both partners are euro area members at time t, zero otherwise.
      - Fixed effects considered: common time fixed effects {T}, pair-specific fixed effects {RP}, reporter country time fixed effects {R}, partner country time fixed effects {P}.
      - The comprehensive fixed effects set is presented as a strong test of euro area membership’s influence on trade imbalances.
  - Determinants of direction and magnitude of trade balances:
    - TradeBalance_rpt = α + β Z_rpt + γ Z_rpt × EMU_rpt {+ Σ_t φ_t T_t} {+ Σ_rp φ_rp RP_rp} {+ Σ_rt φ_rt R_rt} {+ Σ_pt φ_pt P_pt} + ε_rpt,
      - where Z_rpt typically entered as pair-wise differences between reporter and partner country values, and the EMU interaction captures changes after euro introduction.
- Sample and data:
  - Sample: homogeneous set of 18 European countries:
    - The 15 countries which were EU members at the time of euro introduction (eleven adopted the currency from the beginning, Greece joined in 2001) plus Iceland, Norway and Switzerland.
  - Time period analyzed: 1948 through 2008.
  - Primary data source: International Monetary Fund’s Direction of Trade Statistics — nominal values of bilateral exports and imports on an annual basis.
- Identification considerations:
  - Time fixed effects capture joint variations in trade imbalances over time.
  - Pair-specific fixed effects allow pair-wise imbalances to deviate from sample average.
  - Country-time fixed effects capture dynamic country-specific features affecting trade position, including changes in institutional environment, trends in competitiveness, and changes in ease of financing trade imbalances.
- Relation to earlier empirical approaches:
  - Analysis focuses on bilateral trade relations to provide a more detailed assessment of exchange rate conditions’ effects on trade than aggregate trade/current account studies.

*Source: _wp10226 - References*

### introduction of the euro has eased the financing of trade deficits through tighter financial integration and, for

### _wp10226 - introduction of the euro has eased the financing of trade deficits through tighter financial integration and, for

### Stylized patterns of bilateral trade imbalances
- Sample average trade imbalance consistently exceeds the median imbalance, indicating a distribution dominated by a few large bilateral imbalances (notably for small countries such as Iceland, Ireland, and Greece).
- Median and mean imbalances display a U-shaped pattern over time: relatively large imbalances in the Bretton Woods era, moderate imbalances in the 1970s and 1980s, and renewed increases since the mid-1990s.
- The U-shaped pattern applies most strongly to trade between EMU member countries; trade between non-members displays no clear tendency.
- For most EMU countries, the spread between the largest bilateral trade surplus and deficit with a non-member has increased in recent years, suggesting growing divergence in trade competitiveness.

### Regression evidence on exchange rate regimes and imbalances
- Baseline regression of absolute bilateral trade imbalances on an EMU membership dummy with year fixed effects:
  - Estimated β on the EMU variable ≈ 0.018; t-statistic = 2.1; statistically different from zero at the 5 percent level.
  - Interpretation: trade imbalances between euro area member countries are on average about 2 percentage points larger than for the rest of the sample.
- Adding pair-wise fixed effects:
  - EMU coefficient ≈ 0.033 (almost doubles); implies an increase in bilateral trade imbalances among euro members by an average of more than 3 percentage points since adoption of the euro.
  - Comparison: sample mean of about 0.3.
- Results robust to controlling for time-variant country-specific features; EMU effect remains positive, statistically highly significant, and economically sizable.
- Other fixed exchange rate dummy:
  - Positive and significant with only time fixed effects (possible post-World War II influence).
  - Falls in magnitude and becomes statistically indistinguishable from zero after pair-wise fixed effects; may change sign (insignificant) with country time fixed effects.

### Exchange rate volatility and nonlinearities
- Using annual standard deviation of monthly nominal exchange rates and categorical dummies for degrees of nominal variability:
  - With only year fixed effects, exchange rate volatility and trade imbalances are positively related (counter-intuitive).
  - With country fixed effects, bilateral imbalances decrease in nominal exchange rate variability (expected negative relationship).
  - The euro’s effect on trade imbalances remains largely unaffected by inclusion of volatility measures.
- Evidence of nonlinear effects:
  - Moderate nominal exchange rate adjustments have the smallest coefficients.
  - Coefficients increase in magnitude for larger exchange rate changes, consistent with a nonlinear effect of exchange rate variability on trade imbalances.

### Macroeconomic determinants of trade surpluses/deficits
- Real exchange rate (RER rpt = ER prt × CPI rt / CPI pt):
  - Real appreciation (higher lagged RER) is associated with deterioration of trade balances.
  - For periods with mostly fixed exchange rates (Bretton Woods 1949–1973; 1999–2009 covering the euro years; 1973–mid-1980s "currency snake"), the log RER coefficient is negative and highly significant.
  - Magnitude: a one-percent increase in the real exchange rate leads to a reduction in the trade balance of about 4 to 5 percentage points (across these sub-periods).
  - Exception: 1984–1998 shows an unexpectedly positive sign (affected by the 1992 ERM crisis period).
- Relative output growth:
  - Higher relative output growth typically associated with lower bilateral trade surpluses or higher deficits.
  - Euro-area-specific result: interaction term and EMU-only sample coefficient negative.
  - EMU-only estimate = -0.05: an increase in a country’s growth advantage by one percent is associated with a decrease in its bilateral trade balance by about 5 percentage points.
- Business cycle volatility:
  - Proxy: standard deviation of annual real GDP growth over a centered 9-year period.
  - Positive coefficient estimates: countries with relatively lower growth volatility tend to exhibit lower trade surpluses or higher deficits; effect amplified by euro area membership.
  - Magnitude: an increase in the difference in standard deviations by one associated with an increase in the trade balance by about 9 percentage points.
- Fiscal balances (“twin deficits”):
  - Higher fiscal deficits associated with more negative external positions at statistically and economically significant levels.
  - Among euro area members, a one percentage point increase in the (relative) fiscal balance is associated with an improvement in the bilateral trade balance by about two percentage points.

### Market institutions and regulation
- OECD indices (range 0 = least restrictions to 6 = most restrictions) for product and labor market regulation:
  - Scatter plots and regressions show higher relative labor or product market flexibility associated with higher bilateral trade surpluses (or lower deficits); association stronger over time and especially among euro-area pairs.
  - Regressions (Table 5) for aggregate and sub-indices:
    - Majority of econometric evidence: higher relative levels of regulation associated with lower trade balance surpluses or higher deficits.
    - Effect particularly strong among euro area members.
    - Out of 30 estimated coefficients for ten regulatory indicators: 24 coefficients take a negative sign, 16 of which are statistically different from zero (at least at the 5 percent level).

### Persistence of bilateral trade imbalances
- Panel regressions including lagged dependent variable:
  - Strong evidence of persistence: autoregressive coefficient ≈ 0.68; highly statistically significant.
  - Persistence higher for EMU countries:
    - Interaction of lagged dependent variable with EMU membership positive, highly significant, and economically large.
    - Degree of persistence in intra-euro area imbalances about 25 percent higher than elsewhere → autoregressive coefficient ≈ 0.83 for EMU members.
  - With this extension, the non-interacted EMU dummy becomes significantly negative, suggesting the disproportionately large bilateral imbalances under EMU are linked to greater persistence.
  - Result does not extend to other fixed exchange rates.
- Role of market institutions in persistence (Tables 7 results):
  - Higher average employment protection associated with greater persistence among euro area countries.
  - Estimated effect: autoregressive coefficient increases by about 0.09 for each unit increase in the pair-wise average OECD employment regulation measure (range 1 to 6).
  - Illustrative comparison: reducing employment protection from the sample mean of 2.4 to the sample low of 0.8 would reduce persistence by about 0.15, ceteris paribus — equivalent to the deviation of EMU persistence from the sample average.

### Key quantitative findings (selected)
- EMU dummy estimate (year fixed effects): 0.018; t-statistic = 2.1; significant at 5 percent → ~2 percentage points larger imbalances.
- EMU dummy with pair-wise fixed effects: 0.033 → >3 percentage points increase since adoption of the euro.
- Sample mean of bilateral imbalance: about 0.3.
- Real exchange rate elasticity: 1% real appreciation → ~4 to 5 percentage points reduction in trade balance.
- EMU-only growth differential estimate: -0.05 → 1% growth advantage → ~5 percentage points deterioration in bilateral trade balance.
- Business cycle volatility effect: difference in standard deviations +1 → trade balance +9 percentage points.
- Fiscal balance effect (EMU members): +1 percentage point fiscal balance → trade balance improvement ≈ 2 percentage points.
- Persistence (autoregressive coefficient): overall ≈ 0.68; intra-EMU ≈ 0.83.
- Employment protection effect on persistence: +0.09 in autoregressive coefficient per unit increase in average employment protection (index range 1–6).
- Regulatory indicators: 24 of 30 coefficients negative; 16 statistically significant at least at the 5 percent level.

### Policy implications and recommendations
- Fixed nominal exchange rates are associated with larger and more persistent bilateral trade imbalances.
- Structural and policy measures can mitigate imbalances despite fixed exchange rates:
  - Increase labor market flexibility and reduce product market rigidities to lower the size and persistence of imbalances.
  - Structural reforms that smooth the business cycle (e.g., policies increasing domestic-demand contributions to growth in very open trade surplus economies) can reduce precautionary savings and lower trade surpluses.
  - Fiscal consolidation (improving fiscal balances) is likely to help reduce large trade deficits.
- Nonlinearity caution: moderate nominal exchange rate adjustments may affect imbalances differently than larger adjustments; policy design should account for potential nonlinearities in exchange rate effects.
- Institutional reforms in EMU members (labor and product market flexibility) are especially important given the higher persistence and larger imbalances observed within the euro area.

*Source: _wp10226 - introduction of the euro has eased the financing of trade deficits through tighter financial integration and, for (IMF working paper excerpt).*

### REFERENCES:

### _wp10226 - REFERENCES:

### Major references cited
- Abbas, S. M. Ali; Jacques Bouhga-Hagbe; Antonio J. Fatás; Paolo Mauro; and Ricardo C. Velloso, 2010, “Fiscal Policy and the Current Account,” IMF Working Paper, No. 10/121.
- Ahearne, Alan, and Jürgen von Hagen, 2005, “Global Current Account Imbalances: How to Manage the Risk for Europe,” Bruegel Policy Briefs, No. 241.
- Ahearne, Alan; Birgit Schmitz; and Jürgen von Hagen, 2007, “Current Account Imbalances in the Euro Area,” Manuscript.
- Alesina, Alberto; Silvia Ardagna; Giuseppe Nicoletti; and Fabio Schiantarelli, 2003, “Regulation and Investment,” NBER Working Paper, No. 9560.
- Baldwin, Richard, 2006, “The Euro’s Trade Effects,” ECB Working Paper, No. 594.
- Blanchard, Olivier, 2007, “Current Account Deficits in Rich Countries,” NBER Working Paper, No. 12925.
- Blanchard, Olivier, and Francesco Giavazzi, 2002, “Current Account Deficits in the Euro Area. The End of the Feldstein Horioka Puzzle?” MIT Economics Department Working Paper, No. 03–05.
- Berger, Helge, and Volker Nitsch, 2008, “Zooming Out: The Trade Effect of the Euro in Historical Perspective,” Journal of International Money and Finance, Vol. 28, Issue 8, pp.1244–1260.
- Biroli, Pietro; Gilles Mourre; and Alessandro Antonio Turrini, 2010, “Adjustment in the Euro Area and Regulation of Product and Labor Markets: An Empirical Assessment”, CEPR Discussion Paper Series, No. 8010.
- Ca’Zorzi, Michele and Michał Rubaszek, 2008, “On the Empirical Evidence of the Intertemporal Current Account Model for the Euro Area Countries,” ECB Working Paper, No. 895.
- Chinn, Menzie, and Eswar Prasad, 2003, “Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration,” Journal of International Economics, Vol. 59, pp. 47–76.
- Chinn, Menzie, and Shang-Jin Wei, 2008, “A Faith-based Initiative: Do We Really Know that a Flexible Exchange Rate Regime Facilitates Current Account Adjustment?” NBER Working Paper, No. 14420.
- Clarida, Richard, 2007, G7 Current Account Imbalances: Sustainability and Adjustment? (Chicago: University of Chicago Press).
- Debelle, Guy, and Hamid Faruqee, 1996, “What Determines the Current Account? A Cross-Sectional and Panel Approach,” IMF Working Paper, No. 96/58.
- Dekle, Robert; Jonathan Eaton; and Samuel Kortum, 2007, “Unbalanced Trade”, American Economic Review, Vol. 9, No. 2, pp. 351–355.
- Decressin, Jörg, and Emil Stavrev, 2009, “Current Accounts in a Currency Union,” IMF Working Paper, No. 09/127.
- European Commission, 2006, “Adjustment Dynamics in the Euro Area: Experiences and Challenges,” EC EU Economy Review 2006.
- European Commission, 2009, “Special Report: Competitiveness Development within the Euro Area,” Quarterly Report on the Euro Area, Vol. 8, No.1.
- European Commission, 2010, “Special Issue: The Impact of the Global Crisis on Competitiveness and Current Account Divergences in the Euro Area,” Quarterly Report on the Euro Area, Vol. 9, No. 1.
- Friedman, Milton, 1953, “The Case for Flexible Exchange Rates,” in Milton Friedman, Essays in Positive Economics, (Chicago: The University of Chicago Press), pp. 157–203.
- Faruqee, Hamid, 2004. “Measuring the Trade Effects of the Euro,” IMF Working Paper, No. 04/154.
- Fogli, Alessandra, and Fabrizio Perri, 2010, “Macroeconomic Volatility and External Imbalances,” Manuscript.
- Freund, Caroline, 2005, “Current Account Adjustment in Industrial Countries,” Journal of International Money and Finance, Vol. 24, pp. 1278–1298.
- Ghosh, Atish; Anne-Marie Gulde; and Holger Wolf, 2003, Exchange Rate Regimes: Choices and Consequences, (Cambridge, Massachusetts: MIT Press).
- Ghosh, Atish; Marco Terrones; and Jeromin Zettelmeyer, 2008, “Exchange Rate Regimes and External Adjustment: New Answers to an Old Debate,” Manuscript.
- Gruber, Joseph, and Steven Kamin, “Explaining the Global Pattern of Current Account Imbalances,” Journal of International Money and Finance, Vol. 26, pp. 500–522.
- Ju, Jiandong and Shang-Jin Wei, 2007, “Current Account Adjustment: Some New Theory and Evidence,” NBER Working Paper, No. 13388.
- Kennedy, Mike, and Torsten Sløk, 2005, “Are Structural Reforms the Answer To Global Current Account Imbalances?” OECD Economic Studies, No. 41, pp. 47–73.
- Lane, Philip, 2006, “Global Bond Portfolios of Euro,” International Journal of Central Banking, 2, pp. 1–23.
- Lane, Philip, and Gian-Maria Milesi-Ferretti, 2002, “External Wealth, the Trade Balance, and the Real Exchange Rate,” European Economic Review, Vol. 46, pp. 1049–1071.
- Lane, Philip, and Gian-Maria Milesi-Ferretti, 2007, “The International Equity Holdings of Euro Area Investors,” in Robert Anderton and Filippo di Mauro (eds.), The External Dimension of the Euro Area, Assessing the Linkages (Cambridge: Cambridge University Press), pp. 95–117.
- Mendoza, Enrique, 1995, “The Terms of Trade, the Real Exchange Rate, and Economic Fluctuations,” International Economic Review, Vol. 36, pp. 101–137.
- Mody, Ashoka, and Franziska Ohnesorge, 2010, “After The Crisis: Lower Consumption Growth but Narrower Global Imbalances?” IMF Working Paper, No. 10/11.
- Nicoletti, Giuseppe; Steve Golub; Dana Hajkova; Daniel Mirza; and Kwang-Yeol Yoo, 2003, “Policies and International Integration: Influences on Trade and Foreign Direct Investment,” OECD Economics Department Working Paper, No. 359.
- OECD, 2003, “The Sources of Economic Growth in OECD Countries,” (Paris: OECD).
- Rose, Andrew, 1990, “Exchange Rates and the Trade Balance. Some Evidence from Developing Countries,” Economics Letters, Vol. 34, pp. 271–275.
- Rose, Andrew, 2000, “One Money, One Market: The Effect of Common Currencies on Trade,” Economic Policy, Vol. 30, pp. 7–45.
- Santos-Paulino, Amelia, and A.P. Thirlwall, 2004, “The Impact of Trade Liberalisation and Exports, Imports and the Balance of Payments in Developing Countries,” Economic Journal, Vol. 114 (February), F50–F72.
- Schmitz, Birgit, and Jürgen von Hagen, 2009, “Current Account Imbalances and Financial Integration in the Euro Area,” CEPR Discussion Paper, No. 7262.
- Wolf, Holger; Atish Ghosh; Helge Berger; and Anne-Marie Gulde, 2008, Currency Boards in Retrospect and Prospect, (Cambridge, Massachusetts: MIT Press).
- Zemanek, Holger; Ansgar Belke; and Gunther Schnabl, 2010, “Current Account Balances and Structural Adjustment in the Euro Area,” International Economics and Economic Policy, Vol. 7, pp. 83–127.

### Key regression coefficients and statistics (selected tables, exact values preserved)

- Table 1. Trade Imbalances under Fixed Exchange Rate Regimes
  - EMU coefficients: 0.018; 0.033; 0.034; 0.020; 0.033; 0.035
  - Robust standard errors (EMU): (0.009); (0.007); (0.015); (0.009); (0.007); (0.016)
  - Other fixed exchange rate coefficients: 0.090; 0.010; -0.004
  - Robust standard errors (Other fixed): (0.009); (0.006); (0.010)
  - Common time fixed effects? Yes; Yes; No; Yes; Yes; No
  - Pair-wise fixed effects? No; Yes; Yes; No; Yes; Yes
  - Country time fixed effects? No; No; Yes; No; No; Yes
  - Number of observations: 16,491; 16,491; 16,491; 15,939; 15,939; 15,939
  - Adj. R2 values: 0.02; 0.53; 0.63; 0.02; 0.53; 0.64
  - P-value: EMU=Other fixed: 0.000; 0.015; 0.039
  - Notes: OLS regression. Dependent variable is the absolute trade imbalance as a fraction of total bilateral trade. Robust standard errors are reported in parentheses.

- Table 2. Trade Imbalances and Exchange Rate Variability
  - EMU coefficients: 0.046; 0.037; 0.024; -0.031; 0.028; 0.041
  - Robust standard errors (EMU): (0.009); (0.007); (0.015); (0.013); (0.010); (0.019)
  - Exchange rate volatility coefficients: 0.015; 0.001; -0.008
  - Robust standard errors (volatility): (0.002); (0.001); (0.004)
  - Exchange rate change (>0, <2.5%) coefficients: -0.099; -0.013; 0.004
  - Robust standard errors: (0.009); (0.006); (0.010)
  - Exchange rate change (>2.5, <15%) coefficients: -0.041; -0.002; 0.009
  - Robust standard errors: (0.010); (0.007); (0.011)
  - Exchange rate change (>15%) coefficients: -0.014; 0.015; 0.006
  - Robust standard errors: (0.011); (0.008); (0.013)
  - Number of observations: 14,073; 14,073; 14,073; 15,965; 15,965; 15,965
  - Adj. R2 values: 0.03; 0.56; 0.65; 0.04; 0.53; 0.64
  - Notes: OLS regression. Dependent variable is the absolute trade imbalance as a fraction of total bilateral trade. Robust standard errors are reported in parentheses.

- Table 3. Economic Determinants of Bilateral Trade Surpluses/Deficits (selected coefficients)
  - Log real exchange rate: 0.025; -0.048; -0.044; 0.053; -0.037; -0.005
  - Robust standard errors: (0.010); (0.013); (0.008); (0.003); (0.012); (0.005)
  - Log real effective exch. rate reporter: -0.115 (0.026)
  - Log real effective exch. rate partner: 0.190 (0.027)
  - De-meaned real GDP growth differential: 0.001 (0.004); -0.052 (0.004)
  - De-meaned real GDP growth differential × EMU: -0.008 (0.006)
  - Common time fixed effects? No (for listed columns except one: Yes)
  - Pair-wise fixed effects? Yes (all listed)
  - Country time fixed effects? Yes (most listed; some No)
  - Number of observations (varies): 16,060; 6,587; 2,716; 3,766; 2,720; 8,555; 12,026; 1,060
  - Adj. R2: 0.76; 0.84; 0.89; 0.93; 0.95; 0.77; 0.80; 0.98
  - Notes: OLS regression. Dependent variable is the trade imbalance (surplus +, deficit –) as a fraction of total bilateral trade. Robust standard errors are reported in parentheses.

- Table 4. Other Economic Determinants of Bilateral Trade Surpluses/Deficits
  - Difference in real GDP growth volatility: 0.045 (0.011); 0.085 (0.011)
  - Difference in real GDP growth volatility × EMU: 0.055 (0.015)
  - Budget balance (% GDP): 0.006 (0.003); 0.020 (0.003)
  - Budget balance (% GDP) × EMU: 0.012 (0.003)
  - Number of observations: 13,117; 1,060; 7,407; 864
  - Adj. R2: 0.79; 0.98; 0.85; 0.98
  - Notes: OLS regression. Dependent variable is the trade imbalance (surplus +, deficit –) as a fraction of total bilateral trade. Robust standard errors are reported in parentheses. Country specific time and country-pair fixed effects are included but not reported.

- Table 5. Institutional Determinants of Bilateral Trade Surpluses/Deficits (selected entries)
  - Employment protection: Coeff. -0.303 (Full sample), -0.022 (Interaction?), Numb. of obs. 5,060, Adj. R2 0.91; EMU Coeff. -0.230, Numb. of obs. 864, Adj. R2 0.98; robust se (0.014) and (0.008) respectively.
  - Regular employment: -0.006; 0.025; 5,060; 0.91; EMU -0.147; 864; 0.98; robust se (0.013); (0.008); (0.011).
  - Temporary employment: -0.006; -0.029; 5,060; 0.91; EMU -0.101; 864; 0.98; robust se (0.007); (0.005); (0.007).
  - Collective dismissal: 0.408; 0.004; 2,340; 0.96; EMU 0.015; 864; 0.98; robust se (0.006); (0.013); (0.005).
  - Product market regulation: -0.699; -0.065; 720; 0.95; EMU -0.477; 180; 0.99; robust se (0.097); (0.040); (0.076).
  - Administrative regulation: -0.118; -0.057; 720; 0.95; EMU -0.626; 180; 0.99; robust se (0.125); (0.037); (0.073).
  - Domestic economic regulation: -0.179; -0.051; 720; 0.95; EMU -0.349; 180; 0.99; robust se (0.072); (0.027); (0.020).
  - State control: 0.137; -0.035; 720; 0.95; EMU -0.430; 180; 0.99; robust se (0.050); (0.021); (0.027).
  - Barriers to entrepreneurship: -0.236; -0.100; 720; 0.95; EMU -0.600; 180; 0.99; robust se (0.048); (0.048); (0.056).
  - Barriers to trade & investment: 0.048; -0.006; 720; 0.95; EMU -1.081; 180; 0.99; robust se (0.194); (0.049); (0.094).
  - Notes: OLS regression. Dependent variable is the trade imbalance (surplus +, deficit –) as a fraction of total bilateral trade. Robust standard errors are reported in parentheses. Country specific time and country-pair fixed effects are included but not reported.

- Table 6. Persistence of Trade Imbalances
  - Lagged trade imbalance coefficients (Imbalance): 0.675; 0.677; 0.734; 0.735 (robust se (0.009); (0.010); (0.013); (0.013))
  - Lagged trade imbalance × EMU: 0.159; 0.171; 0.076; 0.077 (robust se (0.018); (0.019); (0.017); (0.017))
  - EMU: -0.040; -0.044 (robust se (0.010); (0.010))
  - Lagged trade imbalance × Other fixed exch. Rate: -0.020; -0.017 (robust se (0.016); (0.014))
  - Other fixed exch. rate: 0.012 (0.006)
  - Number of observations: 16,194; 15,932; 16,194; 15,932
  - Adj. R2: 0.81; 0.81; 0.89; 0.89
  - Notes: OLS regression. Dependent variable is listed on the top of each column. Robust standard errors are reported in parentheses. Country specific time and country-pair fixed effects are included but not reported.

- Table 7. Regulatory Environment and Persistence of Trade Imbalances (selected entries)
  - Lagged trade imbalance: 0.756; 0.746; 0.761; 0.643; 0.658; 0.606 (robust se (0.046); (0.046); (0.046); (0.100); (0.103); (0.114))
  - Average employment protection: 0.100; 0.100; 0.054 (robust se (0.017); (0.013); (0.013))
  - Lagged trade imbalance × Average employment protection: -0.029; -0.027; -0.034 (robust se (0.018); (0.017); (0.018))
  - Lagged trade imbalance × Average employment protection × EMU: 0.012; 0.088 (robust se (0.007); (0.024))
  - Average product market regulation: -0.127; 0.227; 0.319 (robust se (0.144); (0.082); (0.125))
  - Lagged trade imbalance × Average product market regulation: 0.000; -0.004; 0.020 (robust se (0.057); (0.057); (0.061))
  - Lagged trade imbalance × Average product market regulation × EMU: -0.020; -0.115 (robust se (0.028); (0.101))
  - Lagged trade imbalance × EMU: -0.171; 0.199 (robust se (0.060); (0.180))
  - EMU: -0.021; -0.028 (robust se (0.011); (0.031))
  - Number of observations: 5,059; 5,059; 5,059; 720; 720; 720
  - Adj. R2: 0.9; 0.9; 0.91; 0.94; 0.94; 0.95
  - Notes: OLS regression. Dependent variable is the absolute trade imbalance as a fraction of total bilateral trade. Robust standard errors are reported in parentheses. Year-specific reporter and partner fixed effects and time-invariant pair-wise fixed effects are always included, but not reported.

### Figures (descriptions and notes)
- Figure 1. Bilateral Trade Imbalances over Time
  - Plots the absolute difference between a country’s exports and imports with a partner as a fraction of total bilateral trade for a sample of 18 European countries.
  - Data source: IMF’s Direction of Trade Statistics.
  - Y-axis tick marks shown: .15, .2, .25, .3, .35. Series: mean, median. Period: 1940–2010.

- Figure 2. Bilateral Trade Imbalances by Group of Country Pairs
  - Graphs average absolute difference between exports and imports with a partner as a fraction of total bilateral trade for groups: EMU-EMU, NonEMU-NonEMU, EMU-NonEMU.
  - Data source: IMF’s Direction of Trade Statistics.
  - Y-axis tick marks shown: .15, .2, .25, .3, .35. Period: 1940–2010.

- Figure 3. Spread of Trade Imbalances (Surplus/Deficit) of EMU Member Countries with Non-EMU Countries
  - Graphs difference between maximum and minimum trade imbalance (exports minus imports as fraction of total bilateral trade) of EMU member countries with one of six non-EMU members (Denmark, Iceland, Norway, Sweden, Switzerland, the United Kingdom).
  - Y-axis tick marks vary by country panels; sample years shown 1990–2010 for panels.

- Figure 4. Trade Imbalances and Regulation
  - Scatter plots linking trade balance (fraction of total bilateral trade) to employment protection (reporter-partner) and product market regulation (reporter-partner) across years 1985, 1990, 1995, 2000, 2005, 2008 for employment protection and 1998, 2003, 2008 for product market regulation.
  - Notes: Filled circles mark country pairs where both partners are/become EMU members. Axes include trade balance ranges -1 to 1 and regulation scales shown (e.g., -4 to 24 and -2 to 12).

### Appendix: Data description (variables, sources, periods)
- Trade balance (Exports-Imports)/(Exports+Imports)
  - Source: IMF Direction of Trade Statistics
  - Period: 1948-2008
- Exchange rate volatility
  - Definition: Standard deviation of monthly bilateral nominal exchange rate
  - Source: IMF International Financial Statistics
  - Period: 1948-2008
- EMU
  - Definition: Dummy for common membership in euro area (time-variant)
  - Period: 1948-2008
- Other fixed exchange rate
  - Definition starts: Dummy for exchange rate volatility < (text truncated in source)

*Italicized source: _wp10226 - REFERENCES: (PDF chapter/section).*

### 0.1 in a given year

### 0.1 in a given year

### Exchange rate measures
- Real exchange rate: pr × Consumer Price Index r / Consumer Price Index p
  - Source: IMF International Financial Statistics
  - Coverage: 1948-2008
- Nominal exchange rate
  - Source: IMF International Financial Statistics
  - Coverage: 1948-2008
- Real effective exchange rate: Index (2005=100), based on relative consumer prices
  - Source: IMF International Financial Statistics
  - Coverage: 1975-2008

### GDP and growth measures
- De-meaned real GDP growth: Deviation of real GDP growth from average growth in previous 4 years
  - Source: IMF International Financial Statistics
  - Coverage: 1948-2008
- Real GDP growth volatility: Standard deviation of real GDP growth over period of 4 years before and after a given year
  - Source: IMF International Financial Statistics
  - Coverage: 1948-2008
- Real GDP growth
  - Source: IMF International Financial Statistics
  - Coverage: 1948-2008

### Fiscal balance
- Budget balance (% GDP): General government balance/GDP
  - Source: IMF International Financial Statistics
  - Coverage: 1960-2008

### Labor market regulation indicators (OECD)
- Employment protection: Strictness of employment protection
  - Source: OECD
  - Coverage: 1985-2008
- Regular employment: Sub-indicator for dismissal of employees on regular contracts
  - Source: OECD
  - Coverage: 1985-2008
- Temporary employment: Sub-indicator for strictness of regulation on temporary contracts
  - Source: OECD
  - Coverage: 1985-2008
- Collective dismissal: Sub-indicator for additional regulation of collective dismissal
  - Source: OECD
  - Coverage: 1998-2008

### Product market regulation indicators (OECD)
- Product market regulation
  - Source: OECD
  - Years: 1998, 2003, 2008
- Administrative regulation: Sub-indicator for administrative regulation
  - Source: OECD
  - Years: 1998, 2003, 2008
- Domestic economic regulation: Sub-indicator for domestic economic regulation
  - Source: OECD
  - Years: 1998, 2003, 2008
- State control: Sub-indicator for state control
  - Source: OECD
  - Years: 1998, 2003, 2008
- Barriers to entrepreneurship: Sub-indicator for barriers to entrepreneurship
  - Source: OECD
  - Years: 1998, 2003, 2008
- Barriers to trade & investment: Sub-indicator for barriers to trade and investment
  - Source: OECD
  - Years: 1998, 2003, 2008

*Source: _wp10226 - 0.1 in a given year*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp10226.pdf_