Did the Euro Protect its Members during the Great Trade Collapse?

Laura Lebastard presented her paper “Did the Euro Protect its Members during the Great Trade Collapse?” at Technische Universität Darmstadt internal PhD seminar on January 31th 2018 and at the European Commission, in the DG ECFIN internal research seminar on February 23th 2018.


This paper measures the effect of the euro during the great trade collapse following the 2008 financial crisis. I use a difference-in-differences approach, comparing the members of the Eurozone with other developed countries. I find that the euro amortize the great trade collapse. To understand the underlying mechanisms, I then work at the sector level and test all the causes of the great trade collapse spotted in the literature. I find that the euro had a premium for exchange rate stability as the volatility of the exchange rate in the rest of the world increased dramatically. This supported the sectors that exported the most, which were the most sensible to uncertainty.

Published on