European Regional Science Association
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European Regional Science Association
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The abstract for paper number 12:
Joan Costa-Font, Univerity of Barcelona & London School of Economics, Barcelona, Spain, Tremosa-Balcells Ramon, Universitat de Barcelona, Barcelona, Spain
The impact of the EMU on trade: credibility vs trade integration effects
Currency unions are a mechanism to reduce exchange rate variability to the maximum extent. Following the hypothesis of the EC One Money One Market report, the set up of a monetary union is assumed to increase economic integration. The objective of the paper is to examine the influence of the EMU as eliminating real exchange rate variability on internal and promoting EU. We employ a gravity model for all Spanish regions fir the period 1997-2001. If regions are heterogeneous within countries, examining regional trade instead of national trade flows will allow capturing unobserved heterogeneity that at the national level smoothes between regions. We find that regions of those areas (e.g., regions in the EU and NAFTA) involved in regional integration arrangements respond idiosyncratically to the process of trade integration.
Unfortunately full paper has not been submitted.