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The anticipated and concurring effects of EMU: exchange rate volatility, institutions and growth

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Author Info

  • Bagella , Michele

    (University of Rome Tor Vergata)

  • Becchetti , Leonardo

    (University of Rome Tor Vergata)

  • Hasan , Iftekhar

    ()
    (Rensselaer Polytechnic Institute and Bank of Finland Research Department)

Abstract

Reduced exchange rate volatility and higher and less heterogeneous quality of institutional rules and macroeconomic policies are two of the main (anticipated and concurring) effects expected from a currency union. In this paper we measure the magnitude of these two effects on the Euro area countries, looking at real effective exchange rates (REER) and at different indicators of quality of institutional rules and macroeconomic policies (QIRMP). We find that the first effect is much stronger than the second when we compare relative changes on Euro area countries and the rest of the world in the relevant period. We further evaluate the impact of both effects on economic growth on a larger sample of countries. Our findings show that both have significant impact on levels (more robust) and on rates of growth (weaker) of per capita GDP.

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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 15/2004.

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Length: 42 pages
Date of creation: 18 Jul 2004
Date of revision:
Handle: RePEc:hhs:bofrdp:2004_015

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Related research

Keywords: real exchange rate; volatility; institutional rules; macroeconomic policy;

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Cited by:
  1. Becchetti, Leonardo & Hasan, Iftekhar, 2005. "The Effects of (within and with EU) Regional Integration: Impact on Real Effective Exchange Rate Volatility, Institutional Quality and Growth for MENA Countries," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) RP2005/73, World Institute for Development Economic Research (UNU-WIDER).
  2. Ray Barrell & Sylvia Gottschalk & Dawn Holland & Ehsan Khoman & Iana Liadze & Olga Pomerantz, 2008. "The impact of EMU on growth and employment," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 318, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. Juan Piñeiro Chousa, & Artur Tamazian, & Davit N. Melikyan,, 2008. "MARKET RISK DYNAMICS AND COMPETITIVENESS AFTER THE EURO: Evidence from EMU Members," William Davidson Institute Working Papers Series wp916, William Davidson Institute at the University of Michigan.

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