A Common Currency Can Triple Trade Volume, New Haas/Berkeley Research Shows.Business Editors BERKELEY, Calif.--(BUSINESS WIRE)--Jan. 31, 2000 What is the impact of a common currency on international trade? Surprisingly large, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. new research by Prof. Andrew Rose Andrew Rose was born in 1980 in Montreal, and is a co-founder and A&R for local record label Secret City Records, having signed Patirick Watson, Miracle Fortress, and Plants and Animals. He has also played an ongoing unofficial role with Pop Montreal and hosts The PopCast. at the Haas School of Business, University of California, Berkeley The University of California, Berkeley is a public research university located in Berkeley, California, United States. Commonly referred to as UC Berkeley, Berkeley and Cal . Rose, an economist and professor of international trade, shows that the trade volume between two countries sharing a common currency is greater than comparable countries with their own currencies -- over three times as high. He says the findings offer a &uot;potent argument in favor of upon the side of; favorable to; for the advantage of. See also: favor currency unions.&uot; Rose's ideas are already being discussed by the financial architects of the European Monetary Union European Monetary Union An agreement by participating European Union member countries that includes protocols for the pooling of currency reserves and the introduction of a common currency. , where the euro is on course to become the shared currency of 11 countries by 2002. Until now, the consensus among most economists is that trade will rise only a little among EMU emu or emeu (both: ē`my  ), common name for a large, flightless bird of Australia, related to the cassowary and the ostrich. countries, which have already opened barriers to free trade
among themselves.
Rose's research predicts the impact is likely to be much greater than previously estimated. Rose studied economic data from the more than 90 countries with existing currency unions, looking at evidence across countries to trace the separate effects on trade of currency unions and of exchange rate volatility. Rose was able to quantify Quantify - A performance analysis tool from Pure Software. , for the first time, the benefit to international trade from using a single currency, which reduces transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). . Until now, economists have instead focused solely on the much smaller effect of reducing exchange rate volatility. Rose's research shows that entering a currency union delivers an effect that is 30 times the impact of eliminating exchange rate volatility. The findings raise important questions of what a common currency would do for other trading partners. Said Rose: &uot;Countries, such as the UK, Sweden and Denmark in Europe, and also Argentina, Mexico, and Canada, among others, may find it worthwhile to join or form currency unions, leading to a further increase in global integration.&uot; In the EMU, Rose expects the triple increase in trade volume to have wide-ranging effects on consumers, business managers, and policy makers alike. While the increased competition will put pressure on business managers, it will also reduce prices for consumers. At the same time, Rose warns, labor representatives may fear for local jobs and demand a greater social net. Contact: Professor Andrew Rose after 9:00 am Pacific Time at 510/642-6609 or at arose@haas.berkeley.edu. View the paper at: http://www.haas.berkeley.edu/~arose/. |
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