The Euro Effect on Eurozone Exports

Abstract

In this article, we examine the impact of the real effective exchange rate for several countries in the Euro area over the period before and after the introduction of the euro. Based on ARDL modeling techniques, we estimate the long-run and short-run relationships between exports volumes and a number of key variables, namely Real Effective Exchange Rate, weighted GDP and Output Gap. This article is particularly oriented towards the study of long-term relationships between the exchange rate and global exports performance, on the one hand; and between exchange rates and intra-European exports performance, on the other. Two measures of exchange rate are considered: a global real exchange rate to investigate the impact of exchange rates on overall exports and an intra European real exchange rate calculated to detect its effect on intra-European trade. The study shows that there is a big difference between the impact of exchange rates on exports before and after the establishment of the European Monetary Union on the one hand, and between the impacts of exchange rates on intra-European global exports on the other hand.