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Currency unions and heterogeneous trade effects: the case of the Latin Monetary Union
[Bilateral treaties and the most-favored-nation clause: the myth of trade liberalization in the nineteenth century]

Author

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  • Jacopo Timini
Abstract
The Latin Monetary Union (LMU) agreement signed in December 1865 by France, Italy, Belgium and Switzerland standardised gold and silver coinage in member countries and allowed free circulation of national coins in the Union. In his seminal study, Flandreau found no evidence of an overall positive effect of the LMU on trade. In this article, I estimate the effects of this currency agreement on trade. In my gravity model I explicitly take into account the changing conditions in the international environment that affected the LMU underlying economic foundations (i.e., the limits on silver coinage agreed upon in 1874) and its rules (i.e., the “liquidation clause” of 1885). I also test the existence of heterogeneous effects on bilateral trade within the LMU. In line with Flandreau, I find no significant LMU trade effects. However, I find support for the hypothesis that the LMU had significant trade effects for the period 1865–1874. These effects were nonetheless concentrated in trade flows between France and the rest of LMU members, following a hub-and-spokes structure. Moreover, I find evidence for the existence of a 1874 “LMU-wide” structural break, which affected the course of trade flows within the Union.

Suggested Citation

  • Jacopo Timini, 2018. "Currency unions and heterogeneous trade effects: the case of the Latin Monetary Union [Bilateral treaties and the most-favored-nation clause: the myth of trade liberalization in the nineteenth cent," European Review of Economic History, European Historical Economics Society, vol. 22(3), pages 322-348.
    • Handle: RePEc:oup:ereveh:v:22:y:2018:i:3:p:322-348.
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    Cited by:

    1. Jia Hou, 2020. "Revisiting the trade effects of the euro: data sources and various samples," Empirical Economics, Springer, vol. 59(6), pages 2731-2777, December.
    2. Roger Vicquéry, 2021. "The Common Currency Effect on International Trade: Evidence from an Accidental Monetary Union," Working papers 856, Banque de France.
    3. Timini, Jacopo, 2023. "Revisiting the ‘Cobden-Chevalier network’ trade and welfare effects," Explorations in Economic History, Elsevier, vol. 89(C).
    4. Campbell, Douglas L. & Chentsov, Aleksandr, 2023. "Breaking badly: The currency union effect on trade," Journal of International Money and Finance, Elsevier, vol. 136(C).
    5. Silviano Esteve‐Pérez & Salvador Gil‐Pareja & Rafael Llorca‐Vivero & José Antonio Martínez‐Serrano, 2020. "EMU and trade: A PPML re‐assessment with intra‐national trade flows," The World Economy, Wiley Blackwell, vol. 43(10), pages 2574-2599, October.
    6. Timini, Jacopo & Conesa, Marina, 2019. "Chinese Exports and Non-Tariff Measures: Testing for Heterogeneous Effects at the Product Level," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 34(2), pages 327-345.
    7. Chiaruttini, Maria Stella, 2020. "Banking integration and (under)development: A quantitative reassessment of the Italian financial divide (1814-74)," IBF Paper Series 03-20, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.
    8. Jacopo Timini & Nicola Cortinovis & Fernando López Vicente, 2020. "The heterogeneous effects of trade agreements with labor provisions (Updated March 2021)," Working Papers 2017, Banco de España, revised Mar 2021.

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    More about this item

    JEL classification:

    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • N73 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: Pre-1913

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