The Welfare Gains of Trade Integration in the European Monetary Union? Stephane Auray a;, Aurelien Eyquem b, Jean-Christophe Poutineau c aEQUIPPE (EA 4018), Universites Lille Nord de France,

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 nancial markets, sticky prices and home bias in production. The model is estimated and 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