nep-int New Economics Papers
on International Trade
Issue of 2005‒09‒17
two papers chosen by
Martin Berka
Massey University

  1. Out in the cold? Iceland’s trade performance outside the EU By Francis Breedon; Thórarinn G. Pétursson
  2. Export Variety and Economic Growth in East European Transition Economies By Ralf Ruhwedel; Michael Funke

  1. By: Francis Breedon; Thórarinn G. Pétursson
    Abstract: Although entering a currency union involves both costs and benefits, an increasing body of research is finding that the benefits – in terms of international trade creation – are remarkably large. For example, Rose (2000) suggests that countries can up to triple their trade by joining a currency union. If true the impact on trade, income and welfare should Iceland join EMU could be enormous. However, by focussing simply on EMU rather than the broad range of currency unions studied by Rose, we find that the trade impact of EMU is smaller – but still statistically significant and economically important. Our findings suggest that the Iceland's trade with other EMU countries could increase by about 60% and that the trade-to-GDP ratio could rise by 12 percentage points should Iceland join the EU and EMU. This trade boost could consequently raise GDP per capita by roughly 4%. These effects would be even larger if the three current EMU outs (Denmark, Sweden and the UK) were also to enter EMU.
    Date: 2004–12
  2. By: Ralf Ruhwedel; Michael Funke
    Abstract: Utilising panel data for 14 East European transition economies we find support for the hypothesis that a greater degree of export variety relative to the U.S. helps to explain relative per capita GDP levels.The empirical work relies upon some direct measures of product variety calculated from 5-digit OECD trade data.Although the issue is still far from being settled, the merging conclusion is that the index of relative export varietyacross countries is significantly correlated with relative per capity income levels.
    Keywords: Product Variety, Transition Economies, Eastern Europe, Economic Growth, Panel Data
    JEL: C33 F43 O31 O52
    Date: 2005–01

This nep-int issue is ©2005 by Martin Berka. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.