Intra-OEEC Trade Liberalization and EPU Reserve Savings

Abstract

This chapter begins the quantitative assessment of the impact of the European Payments Union, by estimating the reserve savings effect and the share of intra-OEEC trade liberalization due to the Union. In Section 9.1 we assess the effective provision of international reserves due to the EPU, under the initial assumption that the Union generated no trade creation. In Section 9.2 we construct and test a political economy model of trade liberalization in OEEC Europe in which the level of international reserves is an explanatory variable. We then use this model and the reserve savings estimates of the previous section to judge the extent to which the EPU was responsible for the removal of quantitative barriers to intra-OEEC trade in the 1950s. Finally, in Section 9.3 we calculate the reserve savings effect of the Union according to the benchmark method, and the impact of reserve savings on regional income in OEEC Europe.