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Real and monetary convergence within the European Union and between the European Union and candidate countries: A rolling cointegration approach

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  • Brada, Josef C.
  • Kutan, Ali M.
  • Zhou, Su

Abstract

We use rolling cointegration to measure the convergence of base money, M2, the consumer price index and industrial output between two reference countries, Germany and France, and recent EU members and some transition economy candidates. Counties that recently joined the EU exhibit time-varying cointegration with the reference countries over much of the 1980-2000 sample period. Cointegration for the transition economies was comparable for M2 and prices, but less so for monetary policy and industrial output. This suggests that a peg to the Euro upon accession is feasible for the East European candidates, but the benefits of joining the Euro zone are as yet limited. --

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Bibliographic Info

Paper provided by ZEI - Center for European Integration Studies, University of Bonn in its series ZEI Working Papers with number B 05-2002.

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Date of creation: 2002
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Handle: RePEc:zbw:zeiwps:b052002

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Keywords: European Union; convergence; currency areas; enlargement; cointegration; policy coordination;

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  1. Richards, Anthony J. & Tersman, Gunnar H. R., 1996. "Growth, Nontradables, and Price Convergence in the Baltics," Journal of Comparative Economics, Elsevier, vol. 23(2), pages 121-145, October.
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  7. Brada, Josef C. & Ktan, Ali M., 2001. "The convergence of monetary policy between candidate countries and the European Union," ZEI Working Papers B 07-2001, ZEI - Center for European Integration Studies, University of Bonn.
  8. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
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  10. Kocenda, Evzen, 2001. "Macroeconomic Convergence in Transition Countries," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 1-23, March.
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  12. Stanislava Janáčková & Josef C. Brada & Liana Payson, 2000. "Price Convergence and the Readiness of the Czech Economy for Accession to the European Union," Eastern European Economics, M.E. Sharpe, Inc., vol. 38(4), pages 73-91, August.
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Citations

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Cited by:
  1. Maximo Camacho & Gabriel Perez-Quiros, 2004. "Are European business cycles close enough to be just one?," Computing in Economics and Finance 2004 16, Society for Computational Economics.
  2. Kleimeier, Stefanie & Sander, Harald, 2006. "Regional versus global integration of euro-zone retail banking markets: Understanding the recent evidence from price-based integration measures," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(3), pages 353-368, July.
  3. Kozmenko, Serhiy & Savchenko, Taras & Kazarinov, Dmytro, 2012. "Assessment of financial convergence of Ukraine with the CIS countries and the European Union," MPRA Paper 50782, University Library of Munich, Germany.
  4. Hubert Gabrisch & Lucjan T. Orlowski, 2009. "A Dynamic Approach to Interest Rate Convergence in Selected Euro-candidate Countries," IWH Discussion Papers 10, Halle Institute for Economic Research.
  5. Alina M. Spiru, 2008. "Inflation Convergence In Central And Eastern European Economies," Journal of Information Systems & Operations Management, Romanian-American University, vol. 2(1), pages 289-316, July.
  6. Kleimeier,Stefanie & Sander,Harald, 2004. "Interest Rate Pass-through in an Enlarged Europe: The Role of Banking Market Structure for Monetary Policy Transmission in Transition Countries," Research Memorandum 045, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  7. A M Spiru, 2007. "Inflation convergence in the new EU member states," Working Papers 590260, Lancaster University Management School, Economics Department.
  8. Alina M. Spiru, 2008. "Inflation Convergence In Central And Eastern European Economies," Romanian Economic Business Review, Romanian-American University, vol. 3(4), pages 14-34, Winter.
  9. Gabrisch, Hurbert & Orlowski, Lucjan, 2009. "Interest Rate Convergence in the Euro-Candidate Countries: Volatility Dynamics of Sovereign Bond Yields," Working Papers 2009001, Sacred Heart University, John F. Welch College of Business.

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