Fair share? An analysis of the trade boosting effects of the Eurozone

Abstract

This paper studies the effects of membership in the Eurozone on bilateral trade patterns. Building on the existing literature by adding years and countries to the dataset and by modifying and combining regression models, this paper runs three models: a gravity model, a panel fixed effects model, and a panel dynamic OLS model to assess the correlation between bilateral trade—by using data on country-pairs of the selected countries—and the partners’ multiplied Real GDP, with a few other controls, and then adding dummy variables to isolate the effect of both partners being in the Eurozone. In a series of modifications made to the dataset and the methodology, it is found that the Eurozone does boost trade, but the effect varies over time, across different countries, and, interestingly, according to the countries included in the dataset.