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Stylized Facts on Bilateral Trade and Currency Unions: Implications for Africa
Author:
Mr. Michal Hulej
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Mr. Charalambos G Tsangarides
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Mr. Pierre Ewenczyk
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Series:
IMF Working Papers
Volume/Issue:
Volume 2006: Issue 031
Language:
English
Publication Date:
01 Jan 2006
DOI:
https://doi.org/10.5089/9781451862911.001
ISBN:
9781451862911
ISSN:
1018-5941
Pages:
37
Keywords:
WP; union; currency; Africa
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper explores and quantifies several aspects of the performance of currency unions using an augmented version of the gravity model and focusing on two samples, the world and Africa. Our empirical findings suggest that, in principle, membership in a currency union should benefit Africa as much as it does the rest of the world. In addition, we find evidence from both samples that the effect of currency unions on trade is large, almost a doubling; currency unions are associated with trade creation, increase price co-movements among members, and make trade more stable; and longer duration of currency union membership brings about more benefits, although with some diminishing returns.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2006: Issue 031