The euro and international equity flows

We use a new panel data set on bilateral gross cross-border equity flows be tween 14 countries. We fit a "gravity model" to these data and a strictly c omparable set of data for manufactures trade between these countries. The r esults are strikingly similar, although the coefficient on the distance var iable is lower for equity than for trade Bows (but still highly significant ). We use the results to throw some light on the likely consequences of uni fying the European equity markets. (C) 1998 Academic Press.