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The Enlargement of the European Union and the Behavior of Real Exchange Rates

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  • Ali M. Kutan
  • Su Zhou

Abstract

The authors further investigate the conditional variance and the persistence of real exchange rate (RER) shocks between Germany and some core European Union (EU) members from January, 1973 through 2004. Using data for all EU15 countries, they test whether the enlargement of the Union has reduced the variability and the persistence of RER shocks between Germany and the rest of the members during the 1990s. They also examine the impact of the introduction of the euro on the variance and persistence of real exchange rate shocks. Finally, the authors extend the analysis to the new members who joined in May, 2004. The results have implications for the economic cost of joining the Union, as well as assessing the timing of the newest members to enter the eurozone.

Suggested Citation

  • Ali M. Kutan & Su Zhou, 2008. "The Enlargement of the European Union and the Behavior of Real Exchange Rates," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 550-561, August.
    • Handle: RePEc:bla:rdevec:v:12:y:2008:i:3:p:550-561
    DOI: 10.1111/j.1467-9361.2008.00471.x
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    Cited by:

    1. Kolev, Galina, 2012. "Quo vadis Eurozone? A reappraisal of the real exchange rate criterion," VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 66061, Verein für Socialpolitik / German Economic Association.
    2. Mohsen Bahmani‐Oskooee & Ali M. Kutan & Su Zhou, 2008. "Do Real Exchange Rates Follow a Nonlinear Mean Reverting Process in Developing Countries?," Southern Economic Journal, John Wiley & Sons, vol. 74(4), pages 1049-1062, April.
    3. Alina F. Klein & Rudolf F. Klein, 2017. "Currency Undervaluation and Economic Growth in Central and Eastern European Countries," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(7), pages 69-85, July.
    4. Ya-Chi Lin & Kuo-Chun Yeh, 2016. "The Impact of 2007/08 Financial Crisis on the Stability and Enlargement of the EMU," Review of Development Economics, Wiley Blackwell, vol. 20(2), pages 624-634, May.

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