Advanced Search
MyIDEAS: Login to save this article or follow this journal

What if the euro had never been launched? A counterfactual analysis of the macroeconomic impact of euro membership

Contents:

Author Info

  • Emmanuel Dubois

    ()
    (PESOR, University of Paris XI)

  • Jerome Hericourt

    ()
    (EQUIPPE, University of Lille and CES, University of Paris 1)

  • Valerie Mignon

    ()
    (EconomiX-CNRS, University of Paris Ouest and CEPII)

Abstract

The aim of this paper is to gauge quantitatively the macroeconomic impact of EMU membership. Building on the Global VAR framework designed by Pesaran et al. (2004), we want to shed light on the following important questions: What if the euro had never been launched? How would national outputs and inflation rates have evolved? We show that monetary unification promoted lower interest rates and higher output in most euro area (EA) countries, relatively to a situation where national monetary policies would have followed a German-type one. If national monetary policies had adopted British monetary preferences after September 1992 however, this would have led to higher interest rates, depreciations of national exchange rates and higher output in most EA countries, especially over the 1992-1998 period. This is particularly true for the three biggest countries of the EA (France, Germany and Italy). Besides, the single currency regime probably did not have a massive impact on price developments.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I3-P70.pdf
Download Restriction: no

Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 3 ()
Pages: 2241-2255

as in new window
Handle: RePEc:ebl:ecbull:eb-09-00317

Contact details of provider:

Related research

Keywords: Euro; counterfactual analysis; global VAR.;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Alexis Penot & Grégory Levieuge, 2009. "The Fed and the ECB: why such an apparent difference in reactivity?," Journal of Financial Economic Policy, Emerald Group Publishing, Emerald Group Publishing, vol. 1(4), pages 319-337, May.
  2. Eichengreen, Barry, 1990. "Is Europe an Optimum Currency Area?," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt40m5g6pp, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Gianmarco I.P. Ottaviano & Daria Taglioni & Filippo di Mauro, 2009. "The euro and the competitiveness of European firms," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 24, pages 5-53, 01.
  4. Carlstrom, Charles T. & Fuerst, Timothy S., 2006. "Oil Prices, Monetary Policy, and Counterfactual Experiments," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 38(7), pages 1945-1958, October.
  5. Cukierman, Alex & Lippi, Francesco, 1999. "Labour Markets and Monetary Union: A Strategic Analysis," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2236, C.E.P.R. Discussion Papers.
  6. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 39(1), pages 195-214, December.
  7. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1750, C.E.P.R. Discussion Papers.
  8. Dées, Stéphane & di Mauro, Filippo & Pesaran, Hashem & Smith, Vanessa, 2005. "Exploring the international linkages of the euro area: a global VAR analysis," Working Paper Series, European Central Bank 0568, European Central Bank.
  9. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  10. Arturo Estrella & Jeffrey C. Fuhrer, 2002. "Dynamic Inconsistencies: Counterfactual Implications of a Class of Rational-Expectations Models," American Economic Review, American Economic Association, American Economic Association, vol. 92(4), pages 1013-1028, September.
  11. Arturo Estrella & Jeffrey C. Fuhrer, 1999. "Are "deep" parameters stable? the Lucas critique as an empirical hypothesis," Working Papers, Federal Reserve Bank of Boston 99-4, Federal Reserve Bank of Boston.
  12. M. Hashem Pesaran & Til Schuermann & Scott M. Weiner, 2002. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 01-38, Wharton School Center for Financial Institutions, University of Pennsylvania.
  13. De Grauwe, Paul, 1995. "Alternative strategies towards monetary union," European Economic Review, Elsevier, Elsevier, vol. 39(3-4), pages 483-491, April.
  14. M. Hashem Pesaran & L. Vanessa Smith & Ron P. Smith, 2007. "What if the UK or Sweden had joined the euro in 1999? An empirical evaluation using a Global VAR," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 12(1), pages 55-87.
  15. Tony Cavoli & Ramkishen S. Rajan, 2006. "Monetary Policy Rules For Small And Open Developing Economies: A Counterfactual Policy Analysis," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, Chung-Ang Unviersity, Department of Economics, vol. 31(1), pages 89-111, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Hamza Bennani, 2013. "Does the ECB consider the persistence of inflation differentials?," Economics Bulletin, AccessEcon, vol. 33(3), pages 2129-2139.
  2. Alexander Chudik & Hashem Pesaran, 2014. "Theory and Practice of GVAR Modeling," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 1408, Faculty of Economics, University of Cambridge.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-09-00317. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.