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Can Monetary Integration Improve Productivity? Empirical Evidence of Eurozone

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  • Padilla León

    (Assistant Professor, Economics and Business Research Center (CIEE)Faculty of Economics & Business Universidad de las Américas, Ecuador)

Abstract

European monetary integration must be understood as an additional step towards strengthening the close ties that have been fostered after the Second World War. The aim of this research is to determine the effect of adopting the euro in terms of productivity growth, measured as the total factor productivity (TPF) variation. We used a panel data analysis with two-way fixed effects to estimate the effects of Euro adoption on the productivity growth. Two panels from 1996 to 2016 were used –one comprised 28 countries of EU members; the other only included 13 countries which joined the EU since 2004. Our findings suggest that the productivity growth of the countries that joined in 2004 and adopted the euro was higher compared to those that maintained their own currency. In addition, we find that FDI was the main channel through which the adoption of the euro influenced productivity growth.

Suggested Citation

  • Padilla León, 2020. "Can Monetary Integration Improve Productivity? Empirical Evidence of Eurozone," South East European Journal of Economics and Business, Sciendo, vol. 15(2), pages 57-69, December.
    • Handle: RePEc:vrs:seejeb:v:15:y:2020:i:2:p:57-69:n:5
    DOI: 10.2478/jeb-2020-0015
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    References listed on IDEAS

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    More about this item

    Keywords

    Productivity growth; Economic integration; Eurozone; Panel data;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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