19 January 2010

Impact of Euro on trade close to zero says research

Colchester Campus

New research looking at the trade effect of currency unions has concluded that the impact of the Euro on trade is close to zero. The research, carried out by academics at the University of Essex and the London School of Economics, sheds new light on the widely accepted claim that the advantages gained from trading within a single currency are a strong reason for countries to join.

The findings are likely to fuel the ongoing heated debate among politicians and businesses about whether or not Britain, and indeed other European countries, should join the Euro.

Professor João Santos Silva, from the Department of Economics at Essex, explained that the difference in results from those in previous studies comes from taking into account that countries in the euro zone already traded more intensively than comparable countries before the Euro was introduced, and because a new and more appropriate statistical method was used to estimate the trade effect of the Euro.

The research, due to published in Annual Reviews Economics at the end of January, is one of the most comprehensive and up-to-date reviews of the costs and benefits of joining a currency union and the particular findings for the Euro Zone go against the consensus of a body of research undertaken to date that claims that the Euro has had a significant impact on trade among Euro Zone members.

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