IDEAS home Printed from https://ideas.repec.org/a/bla/rdevec/v12y2008i3p550-561.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9361.2008.00471.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9361.2008.00471.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kocenda, Evzen & Valachy, Juraj, 2006. "Exchange rate volatility and regime change: A Visegrad comparison," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 727-753, December.
    2. Haluk Erlat, 2003. "The Nature of Persistence in Turkish Real Exchange Rates," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 39(2), pages 70-97, March.
    3. Haug, Alfred A. & MacKinnon, James G. & Michelis, Leo, 2000. "European Monetary Union: a cointegration analysis," Journal of International Money and Finance, Elsevier, vol. 19(3), pages 419-432, June.
    4. Roland Vaubel, 1976. "Real exchange-rate changes in the European community: The empirical evidence and its implications for European currency unification," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 112(3), pages 429-470, September.
    5. Khamfula, Yohane & Huizinga, Harry, 2004. "The Southern African Development Community: suitable for a monetary union?," Journal of Development Economics, Elsevier, vol. 73(2), pages 699-714, April.
    6. Dibooglu, Selahattin & Kutan, Ali M., 2001. "Sources of Real Exchange Rate Fluctuations in Transition Economies: The Case of Poland and Hungary," Journal of Comparative Economics, Elsevier, vol. 29(2), pages 257-275, June.
    7. Meltzer, Allan H., 1986. "Size, persistence and interrelation of nominal and real shocks : Some evidence from four countries," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 161-194, January.
    8. von Hagen, Jurgen & Neumann, Manfred J M, 1994. "Real Exchange Rates within and between Currency Areas: How Far Away Is EMU?," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 236-244, May.
    9. Michael J. Artis & Mark P. Taylor, 1994. "The Stabilizing Effect of the ERM on Exchange Rates and Interest Rates: Some Nonparametric Tests," IMF Staff Papers, Palgrave Macmillan, vol. 41(1), pages 123-148, March.
    10. Teolis, David P. & von Furstenberg, George M., 1993. "Reducing real exchange rate variability and drift: Mexico on the way to North American monetary union?," The North American Journal of Economics and Finance, Elsevier, vol. 4(2), pages 253-269.
    11. Kemme, David M. & Roy, Saktinil, 2006. "Real exchange rate misalignment: Prelude to crisis?," Economic Systems, Elsevier, vol. 30(3), pages 207-230, October.
    12. Vaubel, Roland, 1978. "Real exchange-rate changes in the European community : A new approach to the determination of optimum currency areas," Journal of International Economics, Elsevier, vol. 8(2), pages 319-339, May.
    13. Drabek, Zdenek & Brada, Josef C., 1998. "Exchange Rate Regimes and the Stability of Trade Policy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 642-668, December.
    14. Lommatzsch, Kirsten & Tober, Silke, 2004. "What is behind the real appreciation of the accession countries' currencies?: An investigation of the PPI-based real exchange rate," Economic Systems, Elsevier, vol. 28(4), pages 383-403, December.
    15. Egert, Balazs, 2002. "Estimating the impact of the Balassa-Samuelson effect on inflation and the real exchange rate during the transition," Economic Systems, Elsevier, vol. 26(1), pages 1-16, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. 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.
    3. 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.
    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kemme, David M. & Roy, Saktinil, 2006. "Real exchange rate misalignment: Prelude to crisis?," Economic Systems, Elsevier, vol. 30(3), pages 207-230, October.
    2. Mohsen Bahmani-Oskooee & Ali Kutan, 2009. "The J-curve in the emerging economies of Eastern Europe," Applied Economics, Taylor & Francis Journals, vol. 41(20), pages 2523-2532.
    3. 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.
    4. Chrysost BANGAKE, 2007. "Exchange Rate Volatility and Optimum Currency Area Index : Evidence from Africa," LEO Working Papers / DR LEO 603, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    5. Gabauer, David, 2021. "Dynamic measures of asymmetric & pairwise connectedness within an optimal currency area: Evidence from the ERM I system," Journal of Multinational Financial Management, Elsevier, vol. 60(C).
    6. Pinchuk Anastasiya K., 2013. "Theory of Optimal Currency Zones: from Classics until Today," Business Inform, RESEARCH CENTRE FOR INDUSTRIAL DEVELOPMENT PROBLEMS of NAS (KHARKIV, UKRAINE), Kharkiv National University of Economics, issue 12, pages 81-87.
    7. Kutan, Ali M. & Zhou, Su, 2015. "PPP may hold better than you think: Smooth breaks and non-linear mean reversion in real effective exchange rates," Economic Systems, Elsevier, vol. 39(2), pages 358-366.
    8. Lopcu, Kenan & Dülger, Fikret & Burgaç, Almıla, 2013. "Relative productivity increases and the appreciation of the Turkish lira," Economic Modelling, Elsevier, vol. 35(C), pages 614-621.
    9. José García‐Solanes & Ramón María‐Dolores, 2008. "The New Member States and the Process towards EMU," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 655-667, August.
    10. Kang-Soek LEE & Philippe SAUCIER, 2009. "The Sterling Pound and the Euro. What does Empirical Assessment based on OCA Theory Say Justification for UK to Join the Euro Zone?," LEO Working Papers / DR LEO 1655, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    11. Gammadigbé, Vigninou, 2013. "Endogénéité des critères d'une zone monétaire optimale: un réexamen [Endogeneity of the optimum currency area criteria: a re-examination]," MPRA Paper 46727, University Library of Munich, Germany.
    12. Ibarra, Carlos A., 2011. "Import elasticities and the external constraint in Mexico," Economic Systems, Elsevier, vol. 35(3), pages 363-377, September.
    13. Sell, Friedrich L., 2001. "Braucht es monetäre und reale Konvergenz für eine (in einer) Währungsunion? Anmerkungen zu einer aktuellen Debatte," Working Papers in Economics 2001,1, Bundeswehr University Munich, Economic Research Group.
    14. RNuket Kirci Cevik & Sel Dibooglu & Ali M. Kutan, 2016. "Real and Financial Sector Studies in Central and Eastern Europe: A Review," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 66(1), pages 2-31, February.
    15. Sergey Drobyshevsky & Dmitri Polevoy, 2004. "Problems Associated with Creation of a Single Currency Zone in the CIS Countries," Research Paper Series, Gaidar Institute for Economic Policy, issue 80P, pages 110-110.
    16. Amalia Morales-Zumaquero, 2006. "Explaining real exchange rate fluctuations," Journal of Applied Economics, Universidad del CEMA, vol. 9, pages 345-360, November.
    17. Gervasio Semedo & Laurent Gauthier & Kamel Malik Bensafta, 2012. "Pôles de convergence, gains dynamiques de l’intégration économique et monétaire en Afrique de l’Ouest : une approche en termes de clusters," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(1), pages 37-85.
    18. Caporale, Guglielmo Maria & De Santis, Roberta & Girardi, Alessandro, 2015. "Trade intensity and output synchronisation: On the endogeneity properties of EMU," Journal of Financial Stability, Elsevier, vol. 16(C), pages 154-163.
    19. Hélène Erkel-Rousse, 1997. "Degré de flexibilité des marchés du travail, ajustement à des chocs asymétriques et union monétaire européenne," Économie et Prévision, Programme National Persée, vol. 128(2), pages 79-100.
    20. Weimann, Marco, 2002. "OCA theory and EMU eastern enlargement: An empirical application," Dresden Discussion Paper Series in Economics 07/02, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:rdevec:v:12:y:2008:i:3:p:550-561. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.