EMU and intra-European trade. Long-run evidence using gravity equations.

In this article we present evidence of the long-run effect of the euro on exports for the twelve initial EMU countries for the period 1967-2008 from a double perspective. First, we pool all the bilateral combinations of export flows among the EMU countries in a panel cointegration gravity specification. Second, we estimate a gravity equation for each of the EMU-members vis-à-vis the other eleven partners. Whereas the joint gravity equation provides evidence on the aggregate effect of the euro on intra-European exports, by isolating the individual countries we assess which of them have obtained a larger benefit from the euro. Moreover, this strategy permits to check the robustness of the aggregate results and to find possible asymmetries. Finally, we repeat both the aggregated and individual analysis for the bilateral exports of EMU members to third countries. From an econometric point of view, we apply panel cointegration techniques based on factor models that account for cross-dependence and structural breaks.