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Currency Union Effect on Trade and the FDI Channel
The authors argue that part of the currency union effect on trade is indirect. Currency unions foster foreign direct investment (FDI), which promotes trade due to complementary effects between trade and FDI. Using data for 22 OECD countries,they find that half of the euro impact on trade is driven by additional FDI.
Geography
Link
ftp://mse.univ-paris1.fr/pub/mse/cahiers2004/J04111.pdf