the same currency. previously, this particular gain was also perceived as minimal as cross - border trade is relatively small and companies themselves are said to be capable of converting prices regularly between currencies without suffering any major efficiency losses. however, at the same time, there were price differences in the eu of 20 - 30 per cent on a number of goods ( cars, for example ) that should be relatively easy to both transport over the border and compare in terms of price. these differences appear to have diminished quicker since euro banknotes and coins were introduced in 2001. new research also suggests that the effects of a common currency on prices may have been underestimated. for instance, charles engel from the university of wisconsin compared price differences for the same goods in cities on both sides of the canadian and us border with price differences between different cities in the us. although us and canadian cities have largely the same language and culture, as well as free trade, the different currencies cause prices to vary as much on each side of the border as between cities at opposite ends of the us. finally, of course, there is the increasingly important role of the euro as a dominant international currency. the most immediate gain from this is an increase in seignorage income to the extent that the euro is more widely held outside the euro area than the sum of the currencies that preceded it. taken as a whole, the euro area is the world ’ s largest exporter and importer, accounting for about one - fifth of international trade. despite this the us dollar is still the most common counterparty in foreign exchange trading and the widespread use of the dollar as a ‘ vehicle currency ’ in itself reinforces its status. given that the euro is still a young currency it is likely to grow in importance and may in time have the potential to catch up with the dollar ’ s share in the foreign exchange markets. furthermore, by replacing 12 currencies, in particular the german mark and the french franc, the euro was used immediately as a reserve currency by central banks and became part of a currency basket ( for example in morocco ) or a solitary anchor for the exchange rate policy of some countries ( like estonia, bosnia and bulgaria ). nevertheless, two - thirds of world reserves are still held in us dollars compared with less than 15 per cent in euros, although since the euro ’ s introduction there appears to have been a gradual shift in the composition of the reserves of large economies such as russia,

2002 and 2003 exceeded the reference value of 3 per cent of gdp, which was established in the eu ’ s stability and growth pact. at the same time, attention in the debate was drawn to the temporary and one - off rise in prices of certain goods that occurred when prices were rounded after the introduction of the euro. in light of this, it is understandable that many voters got the impression that there were no economic benefits of participation in the euro. furthermore, those that voted against the single currency may have been strengthened in their belief by the fact that the ‘ no ’ vote was not followed by any speculation against the krona, which instead has appreciated against both the euro and the dollar since the referendum. what didn ’ t feature in the same way in the debate was the longer - term perspective - and it is this perspective that i believe speaks in favour of the euro. it proved difficult to explain that the underlying causes of the crisis in germany and france were mainly domestic structural problems, partly in the labour market. those problems had existed long before emu and could not be remedied by a separate currency and monetary policy. at the same time, the economic slowdown overshadowed the long - term transaction gains of a single currency for trade and the financial markets. in earlier economic research, the gains associated with a single currency were often viewed as uncertain and very small at best. as there were very few contemporary examples of currency unions, comparisons were made instead between fixed and floating exchange rates, in which fixed exchange rates did not appear to result in any definite welfare gains. more recent research has concentrated on the smaller currency unions that have nevertheless existed, and has excluded other factors in socalled gravitation models. this research has pointed to quite substantial gains from currency unions ( a shift in the magnitude of 50 per cent or even more according to researchers such as andrew k rose, at berkeley ). even conservative estimates indicate a considerable rise in trade within currency areas, and attendant welfare gains. other studies, which are directly based on trade dynamics in the last decade, suggest that trade between the euro area countries may have increased by 5 - 10 per cent as a result of the euro. another long - term gain is in price competition. the limited and temporary rise in prices of certain goods and services in conjunction with the introduction of the euro notes and coins should be weighed against the long - term gains from price transparency, the effect of easier price comparisons when prices in the entire euro area are expressed in