Prague Economic Papers 2018, 27(6):654-667 | DOI: 10.18267/j.pep.663

Do Free Trade Regimes and Common Currency Drive Export Growth?

Mindaugas Butkus1, Henrikas Karpavičius2, Kristina Matuzevičiūtė3
1 Social Innovation Research Centre of Šiauliai University Research Institute, Lithuania (mindaugas.butkus@su.lt)
2 Department of Economics of Šiauliai University, Lithuania (henrikas.karpavicius@su.lt)
3 Social Innovation Research Centre of Šiauliai University Research Institute, Lithuania (kristina.matuzeviciute@su.lt)

It is believed that in many countries export activities could enhance countries' capabilities. It is also believed that trade liberalization or common currency could be an export driver. This paper examines the impact of trade liberalization and common currency on EU countries' export growth. The methodology applied in this research is constructed using specifics of the data that arise from a natural experiment. We examined how exogenous events like joining the EU, WTO, EFTA or becoming a member of Eurozone change the environment, in which countries trade. The results using an unbalanced panel data consisting of 28 EU countries for the period 1995-2015 revealed that membership in WTO instantly increases export by 12.5-13.5%, but has no extra effect in longer period; membership in the EU and EFTA has effect on export with a time lag and common currency did not affect export growth at all.

Keywords: export growth, trade regimes, common currency
JEL classification: F13, F40, F42

Received: April 12, 2017; Accepted: December 6, 2017; Published: December 1, 2018  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Butkus, M., Karpavičius, H., & Matuzevičiūtė, K. (2018). Do Free Trade Regimes and Common Currency Drive Export Growth? Prague Economic Papers, 27(6), 654-667. doi: 10.18267/j.pep.663
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Adis, A. A. (2010). Export Performance on the Malaysian Wooden Furniture Industry: An Empirical Study. Journal of International Food and Agribusiness Marketing, 22(1&2), 52-69, http://doi.org/10.1080/ 08974430903372773 Go to original source...
    2. Adu-Gyamfi, N., Korneliussen, T. (2013). Antecedents of Export Performance: the Case of an Emerging Market. International Journal of Emerging Markets, 8(4), 354-372, https://doi.org/10.1108/IJoEM-Jun-2011-0056 Go to original source...
    3. Akdeve, E. (2013). The Determinants of Export Potential: A Case of Ankara Manufacturing Sector. International Journal of Business Management and Economic Research, 4(3), 745-751.
    4. Allaro, H. B. (2012). The Impact of Trade Liberalization on the Ethiopia's Trade Balance. American Journal of Economics, 2(5), 75-81, https://doi/10.5923/j.economics.20120205.02 Go to original source...
    5. Alvarez, R. (2004). Sources of Export Success in Small and Medium-Sized Enterprises: the Impact of Public Programs. International Business Review, 13(3), 383-400, https://doi.org/10.1016/j.ibusrev.2004.01.002 Go to original source...
    6. Arellano, M. (2003). Panel Data Econometrics. Oxford: Oxford University Press. ISBN 9780199245291. Go to original source...
    7. Balabanis, G. I., Katsikea, E. S. (2003). Being an Entrepreneurial Exporter: Does It Pay? International Business Review, 12(2), 233-252, https://doi.org/10.1016/s0969-5931(02) 00098-7 Go to original source...
    8. Baldauf, A., Cravens, D. W., Wagner, U. (2000). Examining Determinants of Export Performance in Small Open Economies. Journal of World Business, 35(1), 61-79, https://doi.org/10.1016/S1090-9516(99)00034-6 Go to original source...
    9. Bouchoucha, M. (2015). The Euro Effect on Eurozone Exports. International Economic Journal, 29(3), 399-418, http://doi.org/10.1080/10168737.2015.1020324 Go to original source...
    10. Brouthers, L. E., Nakos, G. (2005). The Role of Systematic International Market Selection on Small Firms' Export Performance. Journal of Small Business Management, 43(4), 363-381, https://doi.org/10.1111/j.1540-627X.2005.00142.x Go to original source...
    11. Calabro, A., Mussolino, D. (2013). How do Boards of Directors Contribute to Family SME Export Intensity? The Role of Formal and Informal Governance Mechanisms. Journal of Management and Governance, 17(2), 363-403, https://doi.org/10.1007/s10997-011-9180-7 Go to original source...
    12. Carneiro, J., Rocha, A. D., Silva, J. F. D. (2011). Determinants of Export Performance: A Study of Large Brazilian Manufacturing Firms. Brazilian Administration Review, 8(2), 107-132, http://doi.org/10.1590/S1807-76922011000200002 Go to original source...
    13. Carole M. (2009). Determinants of Export Performance in French Wine SMEs. International Journal of Wine Business Research, 21(2), 118-142, https://doi.org/10.1108/17511060910967971 Go to original source...
    14. Carrere, C. (2006). Revisiting the Effects of Regional Trade Agreements on Trade Flows with Proper Specification of the Gravity Model. European Economic Review, 50(2), 223-247, https://doi.org/10.1016/j.euroecorev.2004.06.001 Go to original source...
    15. D'Angelo, A. (2012). Innovation and Export Performance: A Study of Italian High-Tech SMEs. Journal of Management and Governance, 16(3), 393-423, https://doi.org/10.1007/s10997-010-9157-y Go to original source...
    16. Davidson, R., MacKinnon, J. G. (1993). Estimation and Inference in Econometrics. New York: Oxford University Press. ISBN 9780195060119.
    17. Dell'Ariccia, G. (1999). Exchange Rate Fluctuations and Trade Flows: Evidence from the European Union. IMF Staff Papers, 46(3), 315-334, https://doi.org/10.2307/3867646 Go to original source...
    18. Eusebio, R., Andreu, J. L., Belbeze, M. P. L. (2007). Management Perception and Marketing Strategy in Export Performance. Journal of Fashion Marketing and Management, 11(1), 24-40, http://doi.org/10.4337/9781781954393.00021 Go to original source...
    19. Moghaddam, F. M., Bakar, A., Abdul, B., Zaleha, S., Rasid, A., Darestani, H. (2010). The Influence of Export Marketing Strategy Determinants on Firm Export Performance: A Review of Empirical Literatures between 1993-2010. IJFPSS, 1(2), 26-34.
    20. Francois, J., Van Meijl, H., Van Tongeren, F. (2005). Trade Liberalization in the Doha Development Round. Economic Policy, 20(42), 350-391, https://doi.org/10.1111/ j.1468-0327.2005.00141.x Go to original source...
    21. Frankel, J. (2008). The Estimated Effects of the Euro on Trade: Why Are They Below Historical Effects of Monetary Unions Among Smaller Countries? Harvard Kennedy School. Research Working Papers No. 08-076, https://doi.org/10.2139/ssrn.1314434 Go to original source...
    22. Gao, G. Y., Murray, J. Y., Kotabe, M., Lu, J. (2009). A Strategy Tripod Perspective on Export Behaviour: Evidence from Domestic and Foreign Firms Based in An Emerging Economy. Journal of International Business Studies, 41(3), 377-396, https://doi.org/10.1057/jibs.2009.27 Go to original source...
    23. Gaur, J., Gupta, R. (2011). Comparing Firm Performance on the Basis of Age, Size, Leverage, and Group Affiliation in Indian IT Industry. Romanian Journal of Marketing, 6(3), 8-13.
    24. Guner, B., Lee, J., Lucius, H. W. (2010). The Impact of Industry Characteristics on Export Performance: A Three Country Study. International Journal of Business and Economics Perspectives, 5(2), 126-141.
    25. Heckscher, E. F., Ohlin, B. G. (1991). Heckscher-Ohlin Trade Theory. Cambridge, MA: The MIT Press. ISBN 0262082012.
    26. Hultman, M., Katsikeas, C. S., Robson, M. J. (2011). Export Promotion Strategy and Performance: The Role of International Experience. Journal of International Marketing, 19(4), 17-39, https://doi.org/10.1509/jim.11.0022 Go to original source...
    27. IMF (2003). Exchange Arrangements and Foreign Exchange Markets - Developments and Issues. Washington, United States: International Monetary Fund. ISBN 9781589061774, http://doi.org/10.5089/9781589061774.083 Go to original source...
    28. Iyer, K. (2010). The Determinants of Firm-Level Export Intensity in New Zealand Agriculture and Forestry. Economic Analysis & Policy, 40(1), 75-86. Go to original source...
    29. Ju, J., Y. Wu, Zeng, L. (2010). The Impact of Trade Liberalization on the Trade Balance in Developing Countries. IMF Staff Papers, 57(2), 427-449, http://doi.org/10.1057/imfsp.2009.19 Go to original source...
    30. Kassim, L. (2015). The Impact of Trade Liberalization on Export Growth and Import Growth in Sub-Saharan Africa. Regional Integration and Trade in Africa, 47-68, http://doi.org/10.1057/9781137462053_4 Go to original source...
    31. Katsikeas, C. S., Leonidas, C. L., Coudounaris, D. N. (2010). Five Decades of Business Research into Exporting: A Bibliographic Analysis. Journal of International Management, 16(1), 78-91, http://doi.org/10.1016/j.intman.2009.06.001 Go to original source...
    32. Lages, L. F., Montgomery, D. B. (2005). The Relationship between Export Assistance and Performance Improvement in Portuguese Export Ventures: an Empirical Test of the Mediating Role of Pricing Strategy Adaptation. European Journal of Marketing, 39(7-8), 755-784, https://doi.org/10.1108/03090560510601752 Go to original source...
    33. Lages, L. F., Silva, G., Styles, C. (2009). Relationship Capabilities, Quality, and Innovation as Determinants of Export Performance. Journal of International Marketing, 17(4), 47-70, https://doi.org/10.1509/jimk.17.4.47 Go to original source...
    34. Lee, C., Griffith, D. A. (2004). The Marketing Strategy-Performance Relationship in an Export Driven Developing Economy: a Korean Illustration. International Marketing Review, 21(3), 321-334, https://doi.org/10.1108/02651330410539648 Go to original source...
    35. Maurel, C. (2009). Determinants of Export Performance in French Wine SMEs. International Journal of Wine Business Research, 21(2), 118-142, https://doi.org/10.1108/17511060910967971 Go to original source...
    36. Mavrogiannis, M., Bourlakis M. A., Dawson P. J., Ness, M. R. (2008). Assessing Export Performance in the Greek Food and Beverage Industry. British Food Journal, 110(7), 638-654, https://doi.org/10.1108/00070700810887130 Go to original source...
    37. Mukherjee, S., Chanda, R. (2017). Differential Effects of Trade Openness on Indian Manufacturing Firms. Economic Modelling, 61, 273-292, https://doi.org/10.1016/j.econmod.2016.10.001 Go to original source...
    38. Mulligan, R. F. (1996). Export-Import Endogeneity in the Context of the Thirlwall - Hussain Model: An Application of the Durbin-Wu-Hausman Test Incorporating a Monte Carlo Experiment. Applied Economics Letters, 3(4), 275-279, http://doi.org/10.1080/758520879 Go to original source...
    39. Murphy, G., Siedschlaga, I. (2011). Has the Euro Boosted Intra-Euro Area Exports? Evidence from Industry Data. Review of Economics and Institutions, 2(3), https://doi.org/10.5202/ rei.v2i3.44 Go to original source...
    40. O'Cass, A., Julian, C. (2003). Examining Firm and Environmental Influences on Export Marketing Mix Strategy and Export Performance of Australian Exporters. European Journal of Marketing, 37(3-4), 366-384, https://doi.org/10.1108/03090560310459005 Go to original source...
    41. Ottaviano, G., Martincus, C. V. (2011). SMEs in Argentina: Who Are the Exporters? Journal of Small Business Economics, 37(3), 341-361, https://doi:10.1007/s11187-009-9244-0 Go to original source...
    42. Ratnaike, Y. C. (2012). Is There an Empirical between Trade Liberalisation and Export Performance. Economic Letters, 117(1), 375-378, https://doi.org/10.1016/j.econlet.2012.05.015 Go to original source...
    43. Reis, J., Forte, R. (2014). The Impact of Industry Characteristics on Firms' Export Intensity. International Area Studies Review, 19(3), 266-281, https://doi.org/10.1177/2233865916646560 Go to original source...
    44. Ricardo, D. (1955). The Works and Correspondence of David Ricardo. Volume 10, Biographical Miscellany. Cambridge University Press.
    45. Rose, A. K. (2000). One Money, One Market: The Effect of Common Currencies on Trade. Economic Policy, 15(30), 8-45, https://doi.org/10.1111/1468-0327.00056 Go to original source...
    46. Rose, A. K., van Wincoop, E. (2001). National Money as a Barrier to International Trade: The Real Case for Currency Union. American Economic Review, 91(2), 386-390, https://doi.org/10.1257/aer.91.2.386 Go to original source...
    47. Samuelson, P. A. (1975). Trade Pattern Reversals in Time-Phased Ricardian Systems and Intertemporal Efficiency. Journal of International Economics, 5(4), 309-363, https://doi.org/10.1016/0022-1996(75)90037-9 Go to original source...
    48. Santos-Paulinio, A. U. (2007). Aid and Sustainability under Liberalisation in Least Developing Countries. The World Economy, 30(6), 972-998, https://doi.org/10.1111/j.1467-9701.2007.01040.x Go to original source...
    49. Shujiro, U. (2002). Globalization and the Growth in Free Trade Agreements. Asia-Pacific Review, 9(1), 20-32, http://doi.org/10.1080/13439000220141569 Go to original source...
    50. Singh, D. A. (2009). Export Performance of Emerging Market Firms. International Business Review, 18(4), 321-330, https://doi.org/10.1016/j.ibusrev.2009.03.002 Go to original source...
    51. Sousa, C. M. P, Martínez-López, F. J., Coelho, F. (2008). The Determinants of Export Performance: A Review of the Research in the Literature between 1998 and 2005. International Journal of Management Reviews, 10(4), 343-374, https://doi.org/ 10.1111/j.1468-2370.2008.00232.x Go to original source...
    52. Stoian, M. C., Rialp, A., Rialp, J. (2011). Export Performance under the Microscope: A Glance through Spanish Lenses. International Business Review, 20(2), 117-135, https://doi.org/10.1016/j.ibusrev.2010.07.002 Go to original source...
    53. Tantong, P., Karande, K., Nair, A., Singhapakdi, A. (2010). The Effect of Product Adaptation and Market Orientation on Export Performance: A Survey of Thai Managers. Journal of Marketing Theory and Practice, 18(2), 155-170, https://doi.org/10.2753/mtp1069-6679180204 Go to original source...
    54. Vanek, J., Bertrand, T. (1971). Trade and Factor Prices in a Multi-Commodity World. Trade, Balance of Payments and Growth. Papers in International Economics in Honor of Charles P. Kindleberger. New York: Elsevier.
    55. Williams, D. A. (2012). Industry Sector and Export Performance of Small, Locally-Owned Firms. Journal of International Business Research, 11(1), 15-27.
    56. Winters, L. A. (2004). Trade Liberalisation and Economic Performance: an Overview. The Economic Journal, 114(493), F4-F21, https://doi.org/10.1111/j.0013-0133.2004.00185.x Go to original source...
    57. Zakaria, M. (2014). Effects of Trade Liberalization on Exports, Imports and Trade Balance in Pakistan: A Time Series Analysis. Prague Economic Papers, 23(1), 121-139, https://doi.org/10.18267/j.pep.476 Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content