The currency union effect on trade and the FDI channel.

The positive effect of a common currency on trade is empirically well-documented, but the reason of this effect remains unclear. In this paper, we argue that part of the currency union effect on trade is indirect. Currency unions foster foreign direct investment (FDI), which promotes trade due to complementary effects between trade and FDI. Using data for 22 OECD countries, we find that half of the euro impact on trade is driven by additional FDI.

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Year of publication:	2004-11
Authors:	Sousa, José De ; Lochard, Julie
Institutions:	Maison des Sciences Économiques, Université Paris 1 (Panthéon-Sorbonne)
Subject:	Currency union \| trade \| FDI

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Extent:	application/pdf
Series:	Cahiers de la Maison des Sciences Economiques. - ISSN 1624-0340.
Type of publication:	Book / Working Paper
Notes:	23 pages
Classification:	F15 - Economic Integration ; F21 - International Investment; Long-Term Capital Movements ; F33 - International Monetary Arrangements and Institutions
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005797768