This Paper argues that a geographical perspective is fundamental to understanding comparative economic development in the context of globalization. Central to this view is the role of agglomeration in productivity performance; size and location matter. The tools of the new economic geography are...

This paper argues that, under certain conditions, firms consider export activity as a substitute of serving domestic demand. Our econometric model for six euro area countries suggests domestic demand pressure and capacity constraint restrictions as additional variables of a properly specified...

International trade models typically assume that producers in one country trade directly with final consumers in another. In the real world, of course, trade can involve long chains of potentially independent actors who move goods through wholesale and retail distribution networks. These...

The increased integration of the economies of Central and Eastern Europe with the European Union (EU) as the Europe Agreements are progressively implemented, is projected to have a significant impact on trade flows with Spain, as exports and imports grow very rapidly, albeit starting from a very...

This paper shows that the credibility gain from permanently committing to a fixed exchange rate by joining the European Monetary Union can outweigh the loss from giving up independent monetary policy. When the central bank enjoys only limited credibility a pegged exchange rate regime yields a...

We assess monetary convergence preceding the implementation of the European Monetary Union (EMU) through Kalman filtering estimates of the risk premium of eleven forward exchange rates of European and non-European currencies. Since all participating currencies are in effect identical from...

This paper quantifies the economic influence that shocks to EMU cohesion, which in turn reflect the incomplete nature of the monetary union, have on the rest of the world. Disentangling euro area stress shocks and global risk aversion shocks based on a combination of sign, magnitude and...

This paper seeks to integrate more closely the theory of optimum currency areas with the theory of international trade. The currency area is considered as a continuous variable ranging from zero to one: zero if there is no enlargement, and some positive value otherwise, corresponding exactly to...

The paper investigates the link between domestic demand pressure and exports by considering an error correction dynamic panel model for eleven euro area countries over the last two decades. The results suggest that there is a statistically significant substitution effect between domestic and...

During economic downturns, weak domestic demand developments seem to be an additional driver of exports, as firms increase their efforts to serve markets abroad to compensate the fall in domestic sales. This may constitute an additional mechanism adjustment for the euro area countries where real...