Estimating the Euro Effects on Trade with Propensity Score Matching

We investigate the effect of the euro on trade among EMU members. Using various semi-nonparametric methods based on matching, we find that the euro has a statistical and economic impact on trade. The results show that two countries sharing the euro currency trade somewhere between 9% and 14% more than other country-pairs. In addition, we find no evidence of trade diversion due to the euro.