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Rose effect and the euro: is the magic gone?

Tomáš Havránek
Review of World Economics / Weltwirtschaftliches Archiv
Vol. 146, No. 2 (June 2010), pp. 241-261
Published by: Springer
Stable URL: http://www.jstor.org/stable/40865263
Page Count: 21
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Rose effect and the euro: is the magic gone?
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Abstract

This paper presents an updated meta-analysis of the effect of currency unions on trade, focusing on the euro area. Using meta-regression methods such as the funnel asymmetry test, evidence for strong publication bias is found. The estimated underlying effect for currency unions other than the eurozone reaches more than 60%. However, according to the meta-regression analysis, the euro's trade promoting effect corrected for publication bias is insignificant. The Rose effect literature shows signs of the economics research cycle: reported i -statistic is a quadratic concave function of the publication year. Explanatory meta-regression (robust fixed effects and random effects), that can explain about 70% of the heterogeneity in the literature, suggests that results published by some authors might consistently differ from the mainstream output and that study outcomes are systematically dependent on study design (usage of panel data, short-or long-run nature, number of countries in the data set).

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