Convergence in the Core Euro Zone under the Global Financial Crisis

Abstract

A lack of economic convergence among euro member countries seems to be feeding euro-skepticism. Using a Structural Vector Auto Regression model combined with a time varying correlation analysis, we attempt to test the endogeneity theory for the three core euro members, i.e., France, Germany, and Italy. We provide evidence that the adoption of the euro has increased the symmetry of underlying shocks and accelerated the convergence process within this group. Even though the global crisis of 2007~2009 disturbed the European convergence process, the expected endogeneity effects continue to be generated, and the euro-skepticism is not corroborated.

Dynamics and factors of inflation convergence in the European union

“…As for the former strand of literature, our findings corroborate with the main results of Lopez and Papell (2012), who report some evidence for the convergence of inflation rates in the euro area after the introduction of the common currency. Moreover, in the spirit of Lee and Mercurelli (2014) as well as Lopez and Papell (2012), we show that the global financial crisis was not decisively distortive to the process of the economic integration of old EU member states, which includes the convergence of inflation rates. Regarding the latter strand of literature on inflation convergence in prospective euro area members, our results mostly corroborate those of Kočenda et al (2006): we determine that the inflation rates of the new EU member states seem to be synchronized with those of the old EU member states and that the period under which central banks use inflation targeting coincides with inflation convergence.…”

“…Still, it seems that inflation convergence in the EU has been sustained in the post-crisis years. In fact, maybe it even intensified, since there might have simply been strong foundations for convergence from the pre-crisis years in the first place, similarly to what Lee and Mercurelli (2014) show. Overall, we cannot reject Hypothesis 2: the convergence of inflation rates did not weaken in the crisis years.…”

“…The authors uncover clear evidence in favor of more symmetric shocks after the advent of the euro that was interrupted by the GFC but surprisingly not at all by the turmoil caused by the euro crisis after 2010. Overall, the findings by Lee and Mercurelli (2014) speak in favor of multilateral endogeneity effects among Germany, France, and Italy.…”

“…Next, Lee and Mercurelli (2014) use the structural vector autoregressive framework to examine if shocks affecting the economies of France, Germany, and Italy have become more symmetric after the adoption of the common currency. This hypothesis can be reframed in the context of the concept of optimum currency area (OCA) theory.…”

Is there a common path for the integration of European Union banking systems?

“…A significant number of empirical studies impose a strict limited sample based only on emerging financial systems in Europe, i.e. : Kenourgios and Samitas (2011), Guesmi and Nguyen (2014), Horvath and Petrovski (2013), Caporale and Spagnolo (2012), Horvath and Huizinga (2015), or on the contrary only on developed financial systems in Europe, such as: Lee and Mercurelli (2014), Pozzi and Wolswijk (2012), Berben and Jansen (2009), Worthington andHiggs (2010), De Guevara et al (2007).…”