When, about twenty years ago, the Euro was created, one objective was to facilitate intra‐European trade by reducing … transaction costs. Has the Euro delivered? Using sectoral trade data from 1995 to 2014 and applying structural gravity modeling … trade effect for goods of almost 8 percent, but a much smaller effect for services trade. Digging deeper, we detect …

price and, thus, the output effect shows to be the driving force in our model. A terms of trade improvement leads to an … increase in welfare. In the case of a terms-of-trade deterioration, welfare only increases if employment increases. …