Stylized Facts on Bilateral Trade and Currency Unions: Implications for Africa

By Michal Hulej, Charalambos G Tsangarides, Pierre Ewenczyk

January 1, 2006

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Format: Chicago

Michal Hulej, Charalambos G Tsangarides, and Pierre Ewenczyk. Stylized Facts on Bilateral Trade and Currency Unions: Implications for Africa, (USA: International Monetary Fund, 2006) accessed December 3, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Currencies, Gravity models, Labor unions, Monetary unions, Plurilateral trade

Keywords: Africa, Currency, Union, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/031
Stock No:

WPIEA2006031
ISBN:

9781451862911
ISSN:

1018-5941

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