The Euro Effect on Bystanders

Research output: Working paper/PreprintWorking paper


This paper investigates trade effects of the euro focusing on the impact on bystanders. A common currency is expected to lower both variable and fixed trade costs, inducing increased trade flows between currency-union members on both intensive and extensive margins of trade. While this trade-creating effect has gained attention in recent work using firm-level data, few studies have looked on the possible trade-diverting effect for firms remaining outside. In this paper, we use data for Swedish manufacturing firms covering the 1997-2006 period in order to assess the potential trade-diverting effects of the euro on Swedish exports. We consider variations in the impact of the euro taking both firm, industry and export-market characteristics into account. Our results suggest that there are some trade-diverting effects on the intensive margin but that these negative effects of the euro on trade flows are asymmetric and only valid for core markets within the Eurozone.
Original languageEnglish
PublisherDepartment of Economics, Lund University
Number of pages23
Publication statusPublished - 2014

Publication series

NameWorking Paper / Department of Economics, School of Economics and Management, Lund University

Subject classification (UKÄ)

  • Economics


  • euro
  • trade diversion
  • exports
  • heterogeneous firms


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