The introduction of the euro was initially expected to boost trade by an enormous percentage. Following many downward revisions of original estimates the current consensus estimate amounts to an increase of about 5 per cent. In view of the initial high expectations this is often seen as a dismal...

This paper shows that real effective exchange rate (REER) regressions, the standard approach for estimating the response of aggregate exports to exchange rate changes, imply biased estimates of the underlying elasticities. We provide a new aggregate regression specification that is consistent...