The trade and FDI effects of EMU enlargement

J Brouwer; Richard Paap; Jean Marie Viaene

doi:10.1016/j.jimonfin.2007.12.005

The trade and FDI effects of EMU enlargement

J Brouwer, Richard Paap, Jean Marie Viaene

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50 Citations (Scopus)

Abstract

This paper considers the nature and the distribution of trade and FDI effects of a potential enlargement of the European Monetary Union (EMU) to the 10 countries that obtained EU membership in 2004. One-way and two-way error component gravity models are estimated using a data set of unbalanced panel data that combine bilateral trade flows among 29 countries and the distribution of outward FDI stocks among these countries. The results reveal a complementarity between trade and investment and a relationship between trade and exchange rate volatility that depend on the sign of bilateral trade balances. Using a simulation-based technique, we find that estimates of FDI effects of EMU range between 18.5% for Poland and 30% for Hungary.

Original language	English
Pages (from-to)	188-208
Number of pages	21
Journal	Journal of International Money and Finance
Volume	27
Issue number	2
DOIs	https://doi.org/10.1016/j.jimonfin.2007.12.005
Publication status	Published - 2008

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EUR ESE 01
EUR ESE 31

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10.1016/j.jimonfin.2007.12.005

http://hdl.handle.net/1765/12962

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title = "The trade and FDI effects of EMU enlargement",

abstract = "This paper considers the nature and the distribution of trade and FDI effects of a potential enlargement of the European Monetary Union (EMU) to the 10 countries that obtained EU membership in 2004. One-way and two-way error component gravity models are estimated using a data set of unbalanced panel data that combine bilateral trade flows among 29 countries and the distribution of outward FDI stocks among these countries. The results reveal a complementarity between trade and investment and a relationship between trade and exchange rate volatility that depend on the sign of bilateral trade balances. Using a simulation-based technique, we find that estimates of FDI effects of EMU range between 18.5% for Poland and 30% for Hungary.",

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AB - This paper considers the nature and the distribution of trade and FDI effects of a potential enlargement of the European Monetary Union (EMU) to the 10 countries that obtained EU membership in 2004. One-way and two-way error component gravity models are estimated using a data set of unbalanced panel data that combine bilateral trade flows among 29 countries and the distribution of outward FDI stocks among these countries. The results reveal a complementarity between trade and investment and a relationship between trade and exchange rate volatility that depend on the sign of bilateral trade balances. Using a simulation-based technique, we find that estimates of FDI effects of EMU range between 18.5% for Poland and 30% for Hungary.

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The trade and FDI effects of EMU enlargement

Abstract

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