Has the Euro Increased Trade?

A great deal of debate in academic, business, and political circles precipitated the introduction of the Euro. Until recently, however, a lack of data rendered quantifying the impact of the single currency upon members’ trade impossible. This paper is one of the first to explore such issues. At best the Euro has been responsible for an 11 percent increase in Eurozone members’ trade over the period 1999-2004. There appears to be an inverse relationship between a country’s initial openness to trade and its trade activity following its participation in the European Monetary Union. There is also evidence that during the period prior to the introduction of the Euro, trade increased in anticipation of the single currency’s introduction. Finally, Eurozone members appear to trade less with non-members in the wake of the European Monetary Union.