Fear of a two-speed monetary union: what does a basic correlation scatter plot tell us?
AbstractI extend the Bayoumi-Eichengreen (1993) approach by extracting new information from a scatter plot of correlation coefficients between shocks in order to better visualize how far a given country is from a monetary union. Indexes of distance and relative strength can be derived from either a nonlinear or a linear combination of correlations in connexion with distinct welfare loss functions. Using quarterly data on ten countries over 1979:I-2011:IV, shocks have become more symmetric within, but also outside, the euro area. Despite less asymmetry in shock asymmetry since 1999, new statistical tests support the idea of a two-speed EMU.
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Bibliographic InfoPaper provided by Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS in its series Economics Working Paper Archive (University of Rennes 1 & University of Caen) with number 201218.
Date of creation: Mar 2012
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Postal: CREM (UMR CNRS 6211) - Faculty of Economics, 7 place Hoche, 35065 Rennes Cedex - France
Other versions of this item:
- Jean-Sébastien Pentecôte, 2013. "Fear of a two-speed monetary union: what does a basic correlation scatter plot tell us?," Economics Bulletin, AccessEcon, vol. 33(1), pages 289-299.
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- D6 - Microeconomics - - Welfare Economics
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-28 (All new papers)
- NEP-EEC-2012-03-28 (European Economics)
- NEP-MON-2012-03-28 (Monetary Economics)
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