Monetary union and forest products trade – The case of the euro

The objective of this study was to determine if the establishment of a monetary union in European countries had affected the international trade of forest products between the euro-using countries. A differential gravity model of bilateral trade flows was developed and estimated with panel data for the bilateral trade between 12 euro countries from 1988 to 2013, for commodity groups HS44 (wood and articles of wood), HS47 (pulp of wood, fibrous cellulosic material, waste, etc.), HS48 (paper and paperboard), and their sum. The parameters were estimated by ordinary least squares and fixed-effects methods. The results showed a positive or neutral effect of the euro on trade, for all products and countries, with both estimation methods. According to the most general result, the introduction of the euro had increased the average annual rate of growth of the bilateral trade of forest products by 6.5 ± 1.3% from 2002 to 2013.