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Rose effect versus border effect: the Euro's impact on trade

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  • Gianluca Cafiso

Abstract

The purpose of this article is to test the common finding of a positive 'Rose Effect' (RE) in the case of the Euro through a comparison with an indicator of integration among the Euro Zone (EZ) countries: the 'Border Effect' (BE). This study of the Euro's impact using both the RE and the BE is a novelty in the literature. Our findings cast doubts about the supposed trade-costs reduction caused by the Euro, reduction which is the main explanation of the positive RE estimated in several works. Both indicators are estimated by means of a gravity model for bilateral trade flows using a panel of manufacture exports and production figures.

Suggested Citation

  • Gianluca Cafiso, 2011. "Rose effect versus border effect: the Euro's impact on trade," Applied Economics, Taylor & Francis Journals, vol. 43(13), pages 1691-1702.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:13:p:1691-1702
    DOI: 10.1080/00036841003724437
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    References listed on IDEAS

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    1. Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers 2002-01, CEPII research center.
    2. Cafiso, Gianluca, 2009. "Sectorial Border Effects in the European Single Market: an Explanation through Industrial Concentration," Working Paper Series 1116, European Central Bank.
    3. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
    4. Emerson, Michael & Gros, Daniel & Italianer, Alexander & ,, 1992. "One Market, One Money: An Evaluation of the Potential Benefits and Costs of Forming an Economic and Monetary Union," OUP Catalogue, Oxford University Press, number 9780198773245.
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    Cited by:

    1. Esposito, Piero, 2017. "Trade creation, trade diversion and imbalances in the EMU," Economic Modelling, Elsevier, vol. 60(C), pages 462-472.
    2. Kapetanios, George & Serlenga, Laura & Shin, Yongcheol, 2021. "Estimation and inference for multi-dimensional heterogeneous panel datasets with hierarchical multi-factor error structure," Journal of Econometrics, Elsevier, vol. 220(2), pages 504-531.
    3. Andrew K. Rose, 2017. "Why do Estimates of the EMU Effect on Trade Vary so Much?," Open Economies Review, Springer, vol. 28(1), pages 1-18, February.
    4. Gianluca Cafiso & Roberto Cellini & Tiziana Cuccia, 2015. "Do Economic Crises Lead Tourists to Closer Destinations? An Analysis of Italy's Regional Data," CESifo Working Paper Series 5250, CESifo.
    5. María Santana-Gallego & Francisco Ledesma-Rodríguez & Jorge Pérez-Rodríguez, 2016. "The euro effect: Tourism creation, tourism diversion and tourism potential within the European Union," European Union Politics, , vol. 17(1), pages 46-68, March.

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