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Rose Effect and the Euro: Is the Magic Gone?

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  • Havranek, Tomas
Abstract
This paper presents an updated meta-analysis of the effect of currency unions on trade, focusing on the Euro area. Using meta-regression methods such as funnel asymmetry test, evidence for strong publication bias is found. The estimated underlying effect for currency unions other than Eurozone reaches more than 60%. However, according to the meta-regression analysis, the Euro's trade promoting effect corrected for publication bias is insignificant. The Rose effect literature shows signs of the economics research cycle: reported t-statistic is a quadratic concave function of publication year. Explanatory meta-regression (robust fixed effects and random effects), that can explain about 70% of the heterogeneity in the literature, suggests that results published by some authors might consistently differ from the mainstream output and that study outcomes are systematically dependent on study design (usage of panel data, short- or long-run nature, number of countries in the dataset).

Suggested Citation

  • Havranek, Tomas, 2009. "Rose Effect and the Euro: Is the Magic Gone?," MPRA Paper 18479, University Library of Munich, Germany, revised 07 Nov 2009.
    • Handle: RePEc:pra:mprapa:18479
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    More about this item

    Keywords

    Rose effect; Trade; Currency union; Euro; Meta-analysis; Publication bias;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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