The paper considers whether Sweden should join the EMU as based on general equilibrium (GE) effects through reduced trade barriers linked to the single cur-rency. We use in this evaluation a gravity model for trade in Europe derived and estimated in the paper, and the estimates of trade barriers...

The paper presents an alternative derivation of the gravity equation for foreign trade, which is explicitly based on monopolistic competition in the export markets and which is more general than previously in the literature. In contrast to the usual specification, our model allows for the...