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Multilateral Resistance and the Euro Effects on Trade Flows

In: Spatial Econometric Interaction Modelling

Author

Listed:
  • Camilla Mastromarco

    (University of Salento)

  • Laura Serlenga

    (University of Bari, IZA)

  • Yongcheol Shin

    (University of York)

Abstract

Recently, an investigation of unobserved and time-varying multilateral resistance and omitted trade determinants has assumed a prominent role in order to precisely measure the Euro effects on trade. We implement two methodologies: the factor-based gravity model by Serlenga and Shin (The Euro Effect on Intra-EU Trade: Evidence from the Cross Sectionally Dependent Panel Gravity Models, Mimeo, University of York, 2013) and the spatial-based techniques by Behrens et al. (J Appl Econ 27:773–794, 2012), both of which allow trade flows and error terms to be cross-sectionally correlated. Applying these approaches to the dataset over 1960–2008 for 190 country-pairs of 14 EU and six non-EU OECD countries, we find that the Euro impact estimated by the factor-based model amounts to only 4–5 %, far less than the 20 % estimated by the spatial-based model. The cross-section dependency test results also confirm that the factor-based model is more appropriate in accommodating correlation between regressors, and unobserved individual and time effects. Overall we may conclude that the trade-creating effects of the Euro should be viewed in the proper historical and multilateral perspective rather than in terms of the formation of a monetary union as an isolated event.

Suggested Citation

  • Camilla Mastromarco & Laura Serlenga & Yongcheol Shin, 2016. "Multilateral Resistance and the Euro Effects on Trade Flows," Advances in Spatial Science, in: Roberto Patuelli & Giuseppe Arbia (ed.), Spatial Econometric Interaction Modelling, chapter 0, pages 253-278, Springer.
    • Handle: RePEc:spr:adspcp:978-3-319-30196-9_12
    DOI: 10.1007/978-3-319-30196-9_12
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    Citations

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    Cited by:

    1. Güzin Bayar, 2018. "Estimating export equations: a survey of the literature," Empirical Economics, Springer, vol. 54(2), pages 629-672, March.
    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. Laura Serlenga & Yongcheol Shin, 2021. "Gravity models of interprovincial migration flows in Canada with hierarchical multifactor structure," Empirical Economics, Springer, vol. 60(1), pages 365-390, January.

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