This article examines the association between trade and financial linkages among 18 European countries. We find that, with the introduction of the euro, trade imbalances among euro area members widened considerably, even after allowing for permanent asymmetries in trade competitiveness within...

Given the large trade and current account deficits in some of the new EU member states the development of their external economic situation plays a role in assessing their aptitude to enter the European Monetary Union. The empirical analysis with aggregated data indicates that in the eight...