Country size and the trade effects of the euro |
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Authors: | Harald Badinger Fritz Breuss |
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Affiliation: | 1.Europainstitut, Department of Economics,Wirtschaftsuniversit?t Wien,Vienna,Austria;2.Austrian Institute of Economic Research (WIFO),Vienna,Austria |
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Abstract: | This paper investigates whether small countries gain relatively more than large countries from an ‘expansion’ of their market through the creation of a single currency. The introduction of the euro offers a particularly valuable source to test this hypothesis, which we motivate using the theoretical model by Casella of the year 1996. Our results from a panel data analysis, using both aggregate and disaggregated trade data, point to a statistically significant but quantitatively moderate small country bonus. On average, the euro has led to an improvement of the small euro area’s relative export performance by 3–9%. |
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Keywords: | Country size Trade Euro |
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