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Revisiting the Euro’s Trade Cost and Welfare Effects. (2019). Marina, Steininger.
In: Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik).
RePEc:jns:jbstat:v:239:y:2019:i:5-6:p:917-956:n:8.

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  7. Baldwin, R.E. (2006), In or Out: Does it Matter?: An Evidence-based Analysis of the Euro’s Trade Effects. Centre for Economic Policy Research.
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  19. i Ii, (10) National income consists of labor income, tariff rebates Ri and the trade surplus, which is exogenous Si, i. e. Ii = wiLi + Ri – Si and X j i is country i’s expenditure on sector j goods.- 14 Demand of sectors k in all countries i for intermediate usage of sector j varieties produced in country n is given in the first term on the right hand side. The second term denotes the final demand. Tariff rebates are Ri = J j=1 X j i 1 – N n=1 j ni (1+t j ni) .15 14 Aggregate trade deficits in each country are exogenous in the model, which follows the theoretical framework of Caliendo and Parro (2015). All counterfactuals are calculated by holding the countries’ aggregate trade deficits constant, as a share of world GDP. 15 Instead of the goods market clearing condition, one can also use the expenditure equation X j i = J k=1 γ j,k i (1 – k i )(Fk i Xk i + Sk i ) + ! j
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  20. Larch, M., J. Wanner, Y. Yotov, T. Zylkin (2017), The Currency Union Effect: A PPML Re-Assessment with High-Dimensional Fixed Effects .

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  22. n, while trade cost changes directly affect it (see eq. (13)). Trade shares change as a reaction to changes in trade costs, unit costs, and prices. The productivity dispersion (j indicates the intensity of the reaction. The higher (j, the bigger trade changes. Goods market clearing is ensured in eq. (15). Equation (16) provides the new equilibrium and the counterfactual income-equals-expenditure, thus balanced trade condition. The framework of Caliendo and Parro (2015) is exploited to solve the system for multiple sectors, which is an extension of the single-sector solution algorithm proposed by Alvarez and Lucas (2007). The initial guess is made about a vector of wage changes. Using eqs. (12) and (13), it then computes changes in prices, trade shares, expenditure levels, evaluates the trade balance condition eq. (16), and updates the change in wages based on deviations in the trade balance. Revisiting the Euro 945 A.3 Detailed Gravity Results
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  23. Olivero, M.P., Y.V. Yotov (2012), Dynamic Gravity: Endogenous Country Size and Asset Accumulation. Canadian Journal of Economics/Revue canadienne d’économique 45: 64–92.

  24. Santos Silva, J., S. Tenreyro (2006), The Log of Gravity. Review of Economics and Statistics 88: 641–658.

  25. Silva, J.S., S. Tenreyro (2010), Currency Unions in Prospect and Retrospect. Annual Review of Economics 2: 51–74.
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  26. Timmer, M., E. Dietzenbacher, B. Los, R. Stehrer, G. Vries (2015), An Illustrated User Guide to the World Input–Output Database: The Case of Global Automotive Production. Review of International Economics 23: 575–605.

  27. Yotov, Y., M. Larch, J.A. Monteiro, R. Piermartini (2016), An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model. United Nations Conference on Trade and Development and World Trade Organization. Article note: Beitrag für das TH: 20 Years of European Monetary Union. A Appendix A.1 Model Closure Let Y j n denote the value of gross production of varieties in each sector j. For each country n and sector j, Y j n has to equal the value of demand for sectoral varieties from all countries i = 1, . . . , N. The goods market clearing condition is given by Y j n = N i=1 j ni (1 + t j ni) X j i with X j i = J k=1 γ j,k i (1 – k i )Yk i + ! j
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