Would CEEC International Trade be Higher with the Euro?: Evidence from Sectoral Data

International audienceThis paper investigates the potential gains in trade for five Central and Eastern European Countries (Czech Republic, Estonia, Hungary, Poland and Slovakia) generated by participation in the euro area. We use a sectoral approach to assess the impact of the CEECs’ export structures on trade if they adopt the euro. We estimated a static gravity model on 21 OECD countries (excluding the CEECs) between 1993 and 2008 to assess the euro effects in 10 different manufacturing sectors. Then we assess the potential gains or losses for the CEECs of adopting the euro in a counterfactual exercise. Our results indicate that the five CEECs would benefit from the euro since a euro effect is significant in 9 sectors. The widespread euro effect across sectors (between 8% and 44%) shows an unequal impact on the exports of countries. The adoption of the euro would be more advantageous for Estonia than for Slovakia