The Trade and FDI Effects of EMU Enlargement

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 07-077/2

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; International Investment; Long-term Capital Movements ; Foreign Exchange ; International Monetary Arrangements and Institutions ; Financial Aspects of Economic Integration
• Subject: EMU ; exchange rate volatility ; foreign investment ; trade diversion ; vertical integration ; Eurozone ; EU-Mitgliedschaft ; Wirkungsanalyse ; Handelseffekt ; Auslandsinvestition ; Währungsrisiko ; Gravitationsmodell ; EU-Staaten ; Ungarn ; Polen

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Brouwer, Jelle ; Paap, Richard ; Viaene, Jean-Marie
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/86547
• Last update: 10.03.2025, 11:44 AM CET