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What could have been? A synthetic control evaluation of the effect of the Economic and Monetary Union on the net external wealth of periphery member states

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  • Alcobia, João
  • Sobreira, Nuno
  • Cabral, Ricardo

Abstract

This study investigates whether the Euro Area periphery member states would have been wealthier in 2010 had they not participated in the Economic and Monetary Union, as implied by the optimum currency area literature and the 1977 MacDougall report prepared for the European Commission. Using a synthetic control method, we found that by 2010, periphery member states' net international investment positions would show an improvement of, on weighted average, 41 % of GDP, which is equivalent to a combined 2.1 trillion of 2010 euros. The econometric results are robust to standard synthetic control method sensitivity tests. Finally, we discuss why the Economic and Monetary Union may have led to such a severe deterioration in the net external wealth position of the periphery member states.

Suggested Citation

  • Alcobia, João & Sobreira, Nuno & Cabral, Ricardo, 2025. "What could have been? A synthetic control evaluation of the effect of the Economic and Monetary Union on the net external wealth of periphery member states," Economic Systems, Elsevier, vol. 49(3).
    • Handle: RePEc:eee:ecosys:v:49:y:2025:i:3:s0939362525000056
    DOI: 10.1016/j.ecosys.2025.101293
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    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • F15 - International Economics - - Trade - - - Economic Integration
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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