The Welfare Gains of Trade Integration in the European Monetary Union

Stéphane Auray (1) , Aurélien Eyquem (2) , Jean-Christophe Poutineau (3)

1 EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie
2 GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne
3 CREM - Centre de recherche en économie et management

This paper evaluates the welfare gains arising from a deeper trade integration in the European Monetary Union. To do this, the European Monetary Union is represented in a realistic way by an intertemporal general equilibrium model with incomplete financial markets, sticky prices and home bias both in private consumption and production. The model is estimated and globally not rejected by the data. Two main results emerge : (i) an increase in vertical (intermediate goods) trade implies welfare gains while (ii) an increase in horizontal trade implies welfare losses.

Mots clés: trade integration; inflation differentials; welfare analysis; optimal currency areas

Domaines: Economies et finances

Stéphane Auray, Aurélien Eyquem, Jean-Christophe Poutineau. The Welfare Gains of Trade Integration in the European Monetary Union. 2009. ⟨halshs-00464213⟩