The European Monetary Union's effect on trading patterns : A comparison of Sweden, Finland and the Netherlands trading patterns between 1996-2006

Sammanfattning: This Bachelor thesis analyses whether the Swedish trade has been affected by the in-troduction of the European Monetary Union and the common currency Euro. Com-paring Sweden with Finland and Netherland, two countries with similar economic situation but who chose to adopt the euro as their currency, makes the result clearer. Using a modified gravity model based on Flam and Nordström’s (2006) and Rose and Glick’s (2002) gravity models has made it possible to see how the Euro has affected trade in the three chosen countries. By using a panel regression the possibility for standard errors have been minimized. After running a regression for all three countries together the conclusion is that the Euro has had a positive effect on the export. Also when running regressions for each country separately the positive effect of the Euro is clear. How much the Euro itself has affected trade in the chosen countries are hard to tell. There are many reasons for the past years increasing trade and the introduction of the Euro is only one of them. Due to a simplication of the gravity models used in this thesis the full extent of the Euro influence can not be seen here. The effect of the Euro on Swedens trade is a subject that has been discussed for many years. An introduction of the Euro in Sweden would most likely increase Swedens trade even more, but even without the Euro Swedens trade has increased over the past years.