The trade and FDI effects of EMU enlargement
This paper considers the nature and the distribution of trade and FDI effects of a potential enlargement of the European Monetary Union (EMU) to the 10 countries that obtained EU membership in 2004. One-way and two-way error component gravity models are estimated using a data set of unbalanced panel data that combine bilateral trade flows among 29 countries and the distribution of outward FDI stocks among these countries. The results reveal a complementarity between trade and investment and a relationship between trade and exchange rate volatility that depend on the sign of bilateral trade balances. Using a simulation-based technique, we find that estimates of FDI effects of EMU range between 18.5% for Poland and 30% for Hungary.
Year of publication: |
2008
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Authors: | Brouwer, Jelle ; Paap, Richard ; Viaene, Jean-Marie |
Published in: |
Journal of International Money and Finance. - Elsevier, ISSN 0261-5606. - Vol. 27.2008, 2, p. 188-208
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Publisher: |
Elsevier |
Saved in:
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