A new look at economic convergence in Europe: a common factor approach
AbstractWe propose a common factor approach to analyse convergence, which we implement using principal components analysis. We show that this method provides a useful new way of approaching the convergence debate. We apply this technique to a data set of monthly exchange rates of the 12 member countries of the European Monetary Union (EMU) over 1970-2001. Our empirical results neatly capture the convergence patterns related to the various regimes from Bretton Woods towards EMU. The UK's Pound Sterling has been on a gradual convergence path to the Euro, although convergence is less progressed than it was for the EMU countries by 1999. Copyright © 2008 John Wiley & Sons, Ltd.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.
Volume (Year): 14 (2009)
Issue (Month): 1 ()
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Web page: http://www.interscience.wiley.com/jpages/1076-9307/
Other versions of this item:
- Bettina Becker & Stephen G. Hall, 2007. "A New Look at Economic Convergence in Europe: A Common Factor Approach," Discussion Paper Series 2007_09, Department of Economics, Loughborough University, revised Feb 2007.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- F31 - International Economics - - International Finance - - - Foreign Exchange
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