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Revisiting Rose’s common currency debate

Author

Listed:
  • Maria Santana-Gallego

    (Universidad de La Laguna)

  • Francisco J. Ledesma-Rodríguez

    (Universidad de La Laguna)

  • Jorge V. Pérez-Rodríguez

    (Universidad de Las Palmas)

Abstract

The main objective of this research is to revisit the estimation of the effect of a common currency on international trade by applying the new methodology proposed by Helpman, Melitz and Rubistein (2008) and incorporating tourism to the theoretical framework. Rose (2000) estimates an empirical model of bilateral trade, finding a significant coefficient for a currency union variable of 1.2, suggesting an effect of currency unions on trade of over a 200%. Rose (2000)´s finding did not receive full acceptance and further research was consequently devoted to find reasons of such high effect. This still remains as a major puzzle in the International Economics. Rose and Van Wincoop (2001) hold that there may still be some omitted factors that drives countries to both participate in currency unions and trade more. In this research a gravity equation for trade is estimated controlling by international tourism.

Suggested Citation

  • Maria Santana-Gallego & Francisco J. Ledesma-Rodríguez & Jorge V. Pérez-Rodríguez, 2010. "Revisiting Rose’s common currency debate," Working Papers 10-02, Asociación Española de Economía y Finanzas Internacionales.
    • Handle: RePEc:aee:wpaper:1002
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Christmas shopping and currency unions
      by Johan Fourie in Johan Fourie's Blog on 2012-12-15 14:38:42

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    Cited by:

    1. Santana-Gallego, María & Ledesma-Rodríguez, Francisco J. & Pérez-Rodríguez, Jorge V., 2016. "International trade and tourism flows: An extension of the gravity model," Economic Modelling, Elsevier, vol. 52(PB), pages 1026-1033.

    More about this item

    Keywords

    Currency unions; international trade; tourism; gravity equations;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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