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Intra- and extra-euro area import demand for manufactures

Author

Listed:
  • Anderton, Robert
  • Skudelny, Frauke
  • Baltagi, Badi H.
  • Sousa, Nuno

Abstract

The aim of this paper is to improve our understanding of the key determinants of intra- and extra-euro area imports. Using a simultaneous equation estimation framework, and pooling the data across nine euro area countries as an approximation of the euro area, we estimate intra- and extra-euro area import demand functions and impose various restrictions within and across equations. We find that there are significant substitution effects between intra- and extra-euro area imports due to changes in their relative prices, while exchange rate volatility decreases trade vis-à-vis regions characterised by volatility and leads to substitution of trade away from higher-volatility regions towards lower-volatility regions. JEL Classification: C32, C33, E00, E32, O3

Suggested Citation

  • Anderton, Robert & Skudelny, Frauke & Baltagi, Badi H. & Sousa, Nuno, 2005. "Intra- and extra-euro area import demand for manufactures," Working Paper Series 532, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2005532
    Note: 339014
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    References listed on IDEAS

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    1. Hooper, Peter & Kohlhagen, Steven W., 1978. "The effect of exchange rate uncertainty on the prices and volume of international trade," Journal of International Economics, Elsevier, vol. 8(4), pages 483-511, November.
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    5. repec:bla:jecsur:v:12:y:1998:i:5:p:423-69 is not listed on IDEAS
    6. Hartmann, Philipp, 1998. "The Currency Denomination of World Trade after European Monetary Union," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 424-454, December.
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    Citations

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    Cited by:

    1. Mongelli, Francesco Paolo & De Grauwe, Paul, 2005. "Endogeneities of optimum currency areas: what brings countries sharing a single currency closer together?," Working Paper Series 468, European Central Bank.
    2. Baldwin, Richard & Taglioni, Daria, 2006. "Gravity for Dummies and Dummies for Gravity Equations," CEPR Discussion Papers 5850, C.E.P.R. Discussion Papers.
    3. Tkačevs, Olegs & Christodoulopoulou, Styliani & Bobeica, Elena, 2016. "The role of price and cost competitiveness for intra- and extra-euro area trade of euro area countries," Working Paper Series 1941, European Central Bank.
    4. Gunnella, Vanessa & Al-Haschimi, Alexander & Benkovskis, Konstantins & Chiacchio, Francesco & de Soyres, François & Di Lupidio, Benedetta & Fidora, Michael & Franco-Bedoya, Sebastian & Frohm, Erik & G, 2019. "The impact of global value chains on the euro area economy," Occasional Paper Series 221, European Central Bank.
    5. Dieppe, Alistair & Warmedinger, Thomas, 2007. "Modelling intra- and extra-area trade substitution and exchange rate pass-through in the euro area," Working Paper Series 760, European Central Bank.
    6. Heike Joebges & Evelyn Herrmann, 2008. "Euro area exports and imports: Do determinants of intra- and extra-EMU trade differ?," IMK Working Paper 08-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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    More about this item

    Keywords

    intra- and extra-euro area imports; substitution; three stage least squares; trade integration;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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