The <scp>EMU</scp> Effect on Trade: A Re‐Assessment Accounting for Staggered Treatment Adoption

ABSTRACT This paper estimates the EMU effect on trade accounting for heterogeneous effects across space and time. We use an extended two‐way fixed‐effect estimator for staggered difference‐in‐differences within the structural gravity model. The average EMU impact on trade between members accounting for the heterogeneity of the treatment effect at the cohort‐year level is positive (about 15%) but similar to that found using the standard two‐way fixed‐effects estimator. However, the new approach allows analysing the EMU impact by cohorts and by periods from treatment, which reveals heterogeneity in the results and provides new insights on the impact of EMU.