The Impact of Monetary Regimes on International Trade: Are EU Experiences Relevant for Asia?
Review of Market Integration, Forthcoming
35 Pages Posted: 4 Dec 2009
Date Written: December 2, 2009
We extend much research that has been devoted to the effects of the EMU on international trade by introducing monetary regime variables in bilateral export equations with the objective of capturing the effects on trade of changes in monetary regimes relative the pure EMU effects. In addition, we make a strong attempt to distinguish between EU and EMU effects on trade. To identify these different effects we include three groups of countries in our sample: EMU countries which are also members of the EU, EU countries outside the EMU and non-EU countries. The last control group consists of either non-EU industrial countries or non-EU industrial plus emerging market countries in the empirical analysis.
Asian experiences with inflation targeting are discussed and compared to the empirical results we obtain for trade effects of monetary regimes. Even if deeper monetary integration leads to greater trade expansion, it involves political complexity. The choice of an appropriate monetary regime can be a relatively simple unilateral tool for expanding trade.
Keywords: Exports, Monetary Regimes, Exchange Rate Regimes, European Monetary Union
JEL Classification: E52, F15, F31, F33
Suggested Citation: Suggested Citation