Summary of How Much Does the EMU Benefit Trade?

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How Much Does the EMU Benefit Trade? summary
When countries unite around a common currency, do they really enjoy significant increases in trade?

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Europe’s Economic and Monetary Union has conferred trade advantages on its participants in the form of reduced trade costs and the removal of exchange rate risk. Not everyone agrees, however, that those benefits are worth the cost. In a comprehensive study spanning 200 countries and 65 years of trade data, economists Reuven Glick and Andrew K. Rose examine the impact of various currency alliances on trade. getAbstract recommends this scholarly report to economists and anyone looking for a briefing on the value of a monetary union.

In this summary, you will learn

  • How Europe’s Economic and Monetary Union (EMU) stimulates trade among member countries
  • How EMU’s impact compares to that of other currency unions
  • What happens to a country’s exports when it exits a currency union
 

Summary

Countries that share a common currency experience both costs and benefits. The benefits include lower trade expenses, reduced exchange rate risk among members and increased price transparency. The costs include giving up the ability to set monetary policy at the national level and surrendering control...
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About the Authors

Reuven Glick is a group vice president at the Federal Reserve Bank of San Francisco. Andrew K. Rose is a professor at Haas School of Business, University of California, Berkeley.


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