Saturday, June 24, 2006

EMU and trade

Trade and EMU:
The Economist looks at the benefits of a single currency and voices some scepticism over the trade gains.
"A new study* by Richard Baldwin, a trade economist at the Graduate Institute of International Studies in Geneva, scythes through these and earlier, even higher, estimates. He works out that the boost to trade within the euro area from the single currency is much smaller: between 5% and 15%, with a best estimate of 9%. Furthermore, the gain does not build up over time but has already occurred. And the three European Union countries that stayed out—Britain, Sweden and Denmark—have gained almost as much as founder members, since the single currency has raised their exports to the euro zone by 7%."


Amongst Baldwin's arguments is thidentificationon of previous studies that find a collapse in imports and exports when a monetary union dissolves. This, he argues, is as much thresultlt of the creation of new tariffs and barriers or war and civil disobedience than a single currency.

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