Differential Impact of Euro on Trade : a Trend Analysis

This paper studies the differential impact of European Monetary Union on the Export/Import Trade of two sets of members- states: one with a better economic condition as compared to the other, in pre- and post- euro years. It studies the Export/Import Trade data of Austria and Germany (Group-l), and of Italy and Greece (Group-2). The member states participated in the formation of the EMU to increase the volume of Intra-industry bilateral trade among them. The apparent reason forwarded was reduction in cost through the elimination of transaction costs of differential currencies. Since the trade costs are reduced, the flow of manufactured varieties between the member-states increases. Consumers of one member-state perceive the varieties produced by other member-states become relatively cheaper for such reasons as their c.i.f. price decreases. Hence, the demand for more of these manufactured varieties from other member states is enhanced. The study concludes that the expected impact of euro was nowhere to be seen so far. Exploring the data, one could not find a direct relation between the common currency and trade among the member states