The 3rd Financial Economics Meeting (FEM-2022) Conference: New challenges for monetary policy, capital flows, and exchange rate frameworks after COVID-19

As several European countries debate entering, or exiting, the euro, a key policy question concerns how much currency unions (CUs) affect trade. Despite the longstanding academic debate on the topic, recent research has continued to find that CUs exert a large effect on trade. We find, by contrast, that the sizeable recent estimated impact of CUs on trade is driven by other major geopolitical events and is also sensitive to dynamic controls. Overall, using various specifications and controls, we estimate that the impact of CUs on trade is indistinct from zero but with relatively large standard errors.