How do trade costs affect international trade? This paper offers a new approach. We rely on a flexible gravity equation … that predicts variable trade cost elasticities, both across and within country pairs. We apply this framework to the effect … of currency unions on international trade. While we estimate that currency unions are associated with a trade increase of …

equations, trade is more sensitive to trade costs if the exporting country only provides a small share of the destination … country's imports. As a result, trade costs have a heterogeneous impact across country pairs, with some trade flows predicted … currency union effect, I find that a currency union is only associated with substantially higher bilateral trade if the …

Taiwan) and examines the suitability of a Greater China currency union. Currently, the three economies have extensive trade …

In an economy with large wage setters (like industry unions), the monetary regime affects the trade-off between … consumer real wages and employment and profits faced by the wage setters. This paper shows that an exchange rate target …, including participation in a monetary union, is likely to involve lower wages in the traded sector, and higher wages in the non …