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Is Europe growing together or growing apart?

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Author Info

  • Crowley, Patrick

    ()
    (College of Business, Texas A&M University, Corpus Christi)

  • Garcia, Enrique

    (Universita Autonoma de Mexico)

  • Quah , Chee-Heong

    (University of Malaysia)

Abstract

While it is painfully clear that the ’ever closer’ monetary and financial union in the EU has run into serious trouble there has been very little study of the degree to which the countries have become similar or different in their economic growth dynamics. This paper therefore goes beyond the traditional convergence literature to look at their dynamic convergence and explore the path of their changing similarity in the frequency domain. The results show that while a core group of countries may be developing together, there appears to be at least seven identifiable groups of countries with different growth dynamics. Greece appears to be in a class on its own. Business cycles are important but longer-term trends and higher frequency fluctuations all have a role to play in facilitating adjustment. These results provide awkward implications for policy, particularly for those who thought that simply having a union would draw countries closer together (endogenous OCA criteria).

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/BoF_DP_1333.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 33/2013.

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Length: 31 pages
Date of creation: 18 Dec 2013
Date of revision:
Handle: RePEc:hhs:bofrdp:2013_033

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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: business cycles; growth cycles; frequency domain; wavelet analysis; cluster analysis; euro area; European Union; optimal currency area;

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References

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  1. Verona, Fabio & Wolters, Maik H., 2012. "Sticky Information Models in Dynare," Dynare Working Papers 11, CEPREMAP, revised Apr 2013.
  2. Verona, Fabio & Martins, Manuel M. F. & Drumond, Inês, 2012. "(Un)anticipated monetary policy in a DSGE model with a shadow banking system," IMFS Working Paper Series 56, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt.
  3. Ant Bozkaya & William R. Kerr, 2009. "Labor Regulations and European Private Equity," NBER Working Papers 15627, National Bureau of Economic Research, Inc.
  4. Crowley, Patrick & Garcia, Enrique & Quah , Chee-Heong, 2013. "Is Europe growing together or growing apart?," Research Discussion Papers 33/2013, Bank of Finland.
  5. Chadha , Jagjit S. & Newby, Elisa, 2013. "Midas, transmuting all, into paper: The Bank of England and the Banque de France during the Revolutionary and Napoleonic Wars," Research Discussion Papers 20/2013, Bank of Finland.
  6. Takalo, Tuomas & Tanayama, Tanja & Toivanen, Otto, 2013. "Market failures and the additionality effects of public support to private R&D: Theory and empirical implications," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 634-642.
  7. Verona, Fabio, 2013. "Investment dynamics with information costs," Research Discussion Papers 18/2013, Bank of Finland.
  8. Christoffel, Kai & Jaccard, Ivan & Kilponen, Juha, 2013. "Welfare and bond pricing implications of fiscal stabilization policies," Research Discussion Papers 32/2013, Bank of Finland.
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Cited by:
  1. Crowley, Patrick & Garcia, Enrique & Quah , Chee-Heong, 2013. "Is Europe growing together or growing apart?," Research Discussion Papers 33/2013, Bank of Finland.

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