The Impact of the Common Currency on Exports of New EMU Members: Firm-level Evidence for Slovenia and Slovakia
DOI:
https://doi.org/10.12775/EQUIL.2013.024Keywords:
common currency, export, new EMU membersAbstract
There are many studies aiming at estimation of aggregate trade effects of the euro adoption by the old EU countries, which are based on the augmented gravity model. In contrast to the existing literature, we investigate whether the adoption of the common currency increases the export activity of individual firms. In particular, we refer to the new strand in the trade theory literature, based on the Melitz (2003) model, in which export performance depends on labor productivity and costs of exporting. There are already many empirical studies, based on firm level data, showing the relevance of the Melitz (2003) model. Most of those studies demonstrate that export performance positively depends on firms? characteristics such as labor productivity, spending on R&D, age of the firm, the stock of human capital or propensity to innovate, but they do not take into account the impact of the common currency on the cost of exporting. There are only few studies analyzing trade implications of euro adoption for firms? exports of ?old EU? members. In our empirical paper we use the firm level data basis set up by the EBRD and the World Bank for Central and Eastern European Countries. Using the probit model, we analyze whether the accession of Slovenia and Slovakia to the Eurozone did increase the firms? propensity to export in those countries.
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References
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Baldwin R.E. Skudelny F., Taglioni D. (2005), Trade effects of the euro ? evidence from sectoral data, Working Paper Series 446, European Central Bank.
Baldwin R.E. (2006), The euro?s trade effect, ECB Working Paper N.594.
Barr D., Breedon F., Miles D. (2003), Life on the outside: Economic conditions and prospects outside euroland, ?Economic Policy?, Vol. 18, No. 37. DOI: http://dx.doi.org/10.1111/1468-0327.00116_1
Belke A., Spies J. (2008), Enlarging EMU to the East: What Effects on Trade?, ?Empirica?, Vol. 35. DOI: http://dx.doi.org/10.1007/s10663-008-9076-1
Berger H, and Nitsch, V. (2008), Zooming Out: The Trade Effect of the Euro in Historical Perspective, ?Journal of International Money and Finance?, Vol. 27. DOI: http://dx.doi.org/10.1016/j.jimonfin.2008.07.005
Berman N., Martin P., Mayer T. (2009), How do different exporters react to the exchange rate changes? Theory, empirics and aggregate implications, EFIGE working paper 20. DOI: http://dx.doi.org/10.1093/qje/qjr057
Brouwer J., Paap P., Viaene J-M. (2008), The Trade and FDI Effects of EMU Enlargement, ?Journal of International Money and Finance?, Vol. 27. DOI: http://dx.doi.org/10.1016/j.jimonfin.2007.12.005
Cieślik A., Michałek J.J., Michałek A. (2012a), Determinanty działalności eksportowej polskich firm, ?Gospodarka Narodowa?, Vol. LXXX/XXI, No. 7-8.
Cieślik A., Michałek J.J., Michałek A. (2012b), Export activity in Visegrad-4 countries: Firm-level investigation, ?Ekonomia?, No. 30.
Cieślik A., Michałek J.J., Mycielski J. (2009), Prognoza skutków handlowych przystąpienia do Europejskiej Unii Monetarnej dla Polski przy użyciu uogólnionego modelu grawitacyjnego, ?Bank i Kredyt?, No. 40 (1).
Cieślik A., Michałek J.J., Mycielski J. (2012a), Measuring the trade effects of the euro in Central and Eastern Europe, ?The Journal of International Trade & Economic Development?, Vol. 21, No. 1. DOI: http://dx.doi.org/10.1080/09638199.2012.642527
Cieślik A., Michałek J.J., Mycielski J. (2012b), Euro and Trade Flows in Central Europe, ?Equilibrium, Quarterly Journal of Economics and Economic Policy?, Vol. 7, No. 3.
Cieślik A., Michałek J.J., Mycielski J. (2012c), Consequences of the euro adoption by Central and Eastern European (CEE) countries for their trade flows, National Bank of Poland Working Paper No. 118. DOI: http://dx.doi.org/10.2139/ssrn.2102562
European Firms in a Global Economy: EFIGE (2010), The Global Operations of European Firms. The second EFIGE Policy Report, Bruegel.
Feuerstein S., Grimm O. (2007), The Enlargement of the European Monetary Union, ?Bank i kredyt?, No. 2.
Fontagne L., Mayer T., Ottaviano G.I.P. (2009), Of markets, products and prices. The effects of the euro on European firms, Breugel Blueprint Series, No 8. DOI: http://dx.doi.org/10.1007/s10272-009-0289-8
Krugman P. (1980), Scale economies, product differentiation and the pattern of trade, ?American Economic Review?, Vol. 70, No. 5.
Melitz M. (2003), The impact of trade in intra-industry reallocations and aggregate industry productivity, ?Econometrica?, Vol. 71, No. 6. DOI: http://dx.doi.org/10.1111/1468-0262.00467
Fidrmuc J., Korhonen I. (2006), Meta-Analysis Of The Business Cycle Correlation Between The Euro Area And The CEECs, Cesifo Working Paper No. 1693. DOI: http://dx.doi.org/10.1016/j.jce.2006.06.007
Flam H., Nordstrom H. (2003), Trade Volume Effects of the Euro: Aggregate and Sector Estimates, Institute for International Economic Studies, unpublished.
Frankel J. (2008), Should Eastern European Countries join the Euro? The review and update of trade estimates of Endogenous OCA criteria, Research Working Paper, 08-059, J.F. Kennedy School of Government, Harvard University.
Klučka, J., Strelcová S., Leláková E. (2009), EURO in the Slovak Republic, ?Scientific Papers Of The University Of Pardubice Series D Faculty of Economics and Administration?, Vol. 14.
Maliszewska M.A. (2004), New Member States Trading Potential Following EMU Accession: A Gravity Approach, ?Studies and Analyses?, No. 286, CASE ? Center for Social and Economic Research. DOI: http://dx.doi.org/10.2139/ssrn.1441179
Micco A. Stein, E., Ordonez, G. (2003), The Currency Union Effect on Trade: Early Evidence from EMU, ?Economic Policy?, Vol. 18. DOI: http://dx.doi.org/10.1111/1468-0327.00109_1
Rose A. (2000), One Money, One Market: Estimating the Effect of Common Currencies on Trade, ?Economic Policy?, Vol. 15
Rose A. (2001), Currency Unions and Trade: The Effect is Large, ?Economic Policy?, Vol. 16. DOI: http://dx.doi.org/10.1111/1468-0327.00082
Sivak R. (2011), Experience of Slovakia of accession to the Eurozone [in:] Lis S. (ed.), Kontrowersje wokół akcesji Polski do Unii Gospodarczej i Walutowej, Wydawnictwo Uniwersytetu Krakowskiego, Kraków.
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Published
2013-12-31
How to Cite
Cieślik, A., Michałek, J., & Michałek, A. (2013). The Impact of the Common Currency on Exports of New EMU Members: Firm-level Evidence for Slovenia and Slovakia. Equilibrium. Quarterly Journal of Economics and Economic Policy, 8(4), 7–23. https://doi.org/10.12775/EQUIL.2013.024
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International economics
