Abstract
Our study estimates the effects of the European Monetary Union (EMU) on high-technology (HT) export and assesses the potential knowledge spillovers of such trade. Irrespective of the importance of the HT trade channel, none of the previous studies in the literature focus on the effects of a common currency on HT trade. Increasing trade in the HT sector may lead to more efficient use of resources and help countries to move towards a knowledge-based economy. Moreover, it may lead to higher overall growth. After considering multilateral resistances, pair fixed effects and bias correction in the preferred (three-way bias-corrected) model, EMU membership becomes negative and statistically non-significant for HT exports. Furthermore, our findings indicate that the effect of the EMU on HT exports is country-specific, which lends support to the notion of non-homogenous knowledge transfer and country-related knowledge-based economic development within the EMU.
Highlights
The impact of the common currency on trade has generated an extensive amount of research since the seminal paper of Rose (2000)
We explicitly examine how the adoption of the common currency affected the exports of the HT sectors between European Union (EU) member countries
Our results indicate that the impact of the European Monetary Union (EMU) on HT exports is close to zero, which is in line with the novel trade studies
Summary
The impact of the common currency on trade has generated an extensive amount of research since the seminal paper of Rose (2000) Irrespective of this interest, some important topics. Since the HT sector plays a special role in boosting productivity and increasing welfare and lies the heart of the EU policy itself, it is important to examine how the common currency has affected HT trade . We expect that this trade could play an important role in technology transfer between member nations and boost their outputs. Asymmetries in HT trade can provide information about the sectoral convergence/ divergence among member countries, which is highly relevant for the success of the Euro, and by extension, the common monetary policy
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