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 ten countries that obtained EU membership in 2004. One-way and two-way error component gravity models are estimated using a dataset of unbalanced panel data that combines 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 depends 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 percent for Poland and 30 percent for Hungary.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 2123

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 ; Europäische Wirtschafts- und Währungsunion ; EU-Erweiterung ; Wirtschaftspolitische Wirkungsanalyse ; Außenhandelseffekt ; Direktinvestition ; Wechselkursrisiko ; Gravitationsmodell ; EU-Staaten ; Ungarn ; Polen

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Brouwer, Jelle ; Paap, Richard ; Viaene, Jean-Marie
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/26168
• Last update: 10.03.2025, 11:42 AM CET