Some trade effects of the emu process on israel

This essay estimates five effects of the EMU process on Israel's trade with five major European countries, using the error correction method: (1) An increase in outsiders' relative costs; (2) A change of interest rates in Europe; (3) An enhanced volatility of the Euro; (4) An increase in insiders' welfare; (5) An increase in insiders' public consumption. Empirically, the first three effects are found to be muted. The fourth effect will boost Israeli exports over the long term, but reduces exports in the short term. The fifth effect will increase Israeli exports in the short term if the UK joins the EMU.