Arbeitspapier
The Currency Union Effect: A PPML Re-assessment with High-Dimensional Fixed Effects
Recent work on the effects of currency unions (CUs) on trade stresses the importance of using many countries and years in order to obtain reliable estimates. However, for large samples, computational issues limit choice of estimator, leaving an important methodological gap. To address this gap, we unveil an iterative PPML estimator which flexibly accounts for multilateral resistance, pair-specific heterogeneity, and correlated errors across countries and time. When applied to a comprehensive sample with more than 200 countries trading over 65 years, these innovations flip the conclusions of an otherwise rigorously-specified linear model. Our estimates for both the overall CU effect and the Euro effect specifically are economically small and statistically insignificant. The effect of non-Euro CUs, however, is large and significant. Notably, linear and PPML estimates of the Euro effect increasingly diverge as the sample size grows.
- Language
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Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 6464
- Classification
-
Wirtschaft
Estimation: General
Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
Trade: General
Economic Integration
International Monetary Arrangements and Institutions
- Subject
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currency unions
PPML
high-dimensional fixed effects
- Event
-
Geistige Schöpfung
- (who)
-
Larch, Mario
Wanner, Joschka
Yotov, Yoto V.
Zylkin, Thomas
- Event
-
Veröffentlichung
- (who)
-
Center for Economic Studies and ifo Institute (CESifo)
- (where)
-
Munich
- (when)
-
2017
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Larch, Mario
- Wanner, Joschka
- Yotov, Yoto V.
- Zylkin, Thomas
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2017
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