{"id":2049,"date":"2020-03-05T06:20:58","date_gmt":"2020-03-05T06:20:58","guid":{"rendered":"https:\/\/bschool.nus.edu.sg\/dean\/?p=2049"},"modified":"2020-03-05T06:20:58","modified_gmt":"2020-03-05T06:20:58","slug":"response-to-malmberg","status":"publish","type":"post","link":"https:\/\/bschool.nus.edu.sg\/dean\/2020\/03\/05\/response-to-malmberg\/","title":{"rendered":"Response to Malmberg"},"content":{"rendered":"<p style=\"font-weight: 400\">Bo Malmberg published an op-ed on August 2, 2003 in\u00a0<em>Dagens Nyheter\u00a0<\/em>which argued that \u201cit is not credible to rely on Rose\u2019s research when one argues that membership in the euro-zone will boost Swedish trade \u2026 one of the most important lines of reasoning adopted by the yes-campaign can thus be refuted.\u201d\u00a0\u00a0He argues that my study is misleading since most currency unions have been between small and distant countries, whereas Sweden\u2019s potential partners in EMU would be large and near, so that transactions costs (such as those of having different monies) are unimportant.<\/p>\n<p style=\"font-weight: 400\">The choice that Sweden faces is a real one.\u00a0\u00a0My modest contribution to the debate is simply to point out that there is good reason to believe that the effect of joining EMU on Sweden\u2019s trade may be surprisingly large.\u00a0\u00a0Mr. Malmberg\u2019s logic has two problems: it is wrong in theory, and wrong in practice.<\/p>\n<p style=\"font-weight: 400\">Is it true that trade between small and distant economies is more affected by the costs of having different currencies than large economies that are close by?\u00a0\u00a0Well, consider Nordmalm and Sodermalm, two adjacent suburbs of rich Stockholm.\u00a0\u00a0Malmberg\u2019s argument is that introducing separate currencies for these areas would have little effect, a conclusion that boggles my mind.\u00a0\u00a0Indeed, trade between Nordmalm\u00a0\u00a0and Sodermalm is easier in part because they both use the same money \u2026 just as trade between Sweden and EMU would become easier if Sweden joins.<\/p>\n<p style=\"font-weight: 400\">Trade between two countries (or cities, or suburbs, or people \u2026) is clearly easier if they use the same money.\u00a0\u00a0The question is: how much?\u00a0\u00a0Luckily the EMU experiment has been going on for four years, and the early results are already in.\u00a0\u00a0Three economists from the Inter-American development bank (Micco, Stein, and Ordo\u00f1ez) have a widely-cited paper that examines the evidence from the first few years of EMU, and compared the trade for those inside EMU to those of outsiders, including Sweden, the UK and Denmark.\u00a0\u00a0They find that those inside the Euro experienced an increase in trade of about 15% relative to outsiders.\u00a0\u00a0Since most of that was before the euro was actually in circulation, and there may be plenty more to come, I conclude that joining would probably have a big long-term effect on Swedish trade.<\/p>\n<p style=\"font-weight: 400\">Sweden has an open economy that already does a lot of trade with the Euro zone.\u00a0\u00a0Thus, if accession has even a small effect on boosting Swedish trade with EMU\u00a0\u00a0\u2013 as others, including me, believe, and the data bear out \u2013\u00a0\u00a0joining may have large positive effects.\u00a0\u00a0It is also true that accession will have many other benefits and costs, both political and economic.\u00a0\u00a0Still, after a 2500-page analysis even the euro-skeptical British government believes that joining EMU would have a large positive effect on trade.\u00a0\u00a0It is unfair and unwise for the \u201cNo\u201d side to ignore the potential benefit of EMU in terms of extra Swedish trade.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bo Malmberg published an op-ed on August 2, 2003 in\u00a0Dagens Nyheter\u00a0which argued that \u201cit is not credible to rely on Rose\u2019s research when one argues that membership in the euro-zone will boost Swedish trade \u2026 one of the most important lines of reasoning adopted by the yes-campaign can thus be refuted.\u201d\u00a0\u00a0He argues that my study [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-2049","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v18.0 (Yoast SEO v21.8.1) - 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