Document Type

Journal article

Source Publication

Agricultural Economics

Publication Date

8-22-2016

Volume

47

Issue

6

First Page

661

Last Page

670

Keywords

Agriculture, Currency union, Gravity equation, International trade, Manufacturing

Abstract

Andrew Rose has long argued that a common currency has a large effect on increasing trade. Recently, Rose has called into question the reliability of this conclusion, as new techniques have emerged for estimating gravity equations. This article uses the sector-specific gravity model developed by Anderson and Yotov (2010a) to investigate if disaggregated trade can provide a reliable estimate of a common currency’s effect. Disaggregating trade alone is insufficient to obtain a reliable estimate of a currency union, regardless of econometric technique, when the effect of a common currency on trade is uniform across all unions. Disaggregating the universe of currency unions with individual effects provides a reliable ranking of currency unions, independent of estimation method, by the effect that each union’s currency has on increasing trade. These rankings differ across sectors.

DOI

10.1111/agec.12263

Print ISSN

15740862

Publisher Statement

© 2016 International Association of Agricultural Economists

Full-text Version

Accepted Author Manuscript

Recommended Citation

Whitten, G. W. (2016) Disaggregated trade and disaggregated currency unions: a ranking of common currency effects. Agricultural Economics, 47(6), 661-670. DOI: 10.1111/agec.12263