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Assessing the Endogeneity of OCA Conditions in EMU

  • Carlos Vieira

    ()

    (Departamento de Economia, Universidade de Évora and CEFAGE-UE)

  • Isabel Vieira

    ()

    (Departamento de Economia, Universidade de Évora and CEFAGE-UE)

The academic and political discussion about which countries met the conditions for joining EMU was decisively influenced by the Frankel and Rose (1997) hypothesis concerning endogenous OCA properties. The answer to their question "Is EMU more justifiable ex post than ex ante?" was a definite yes in their ex ante analysis. Our ex post examination of the euro's first decade, however suggests that the hypothesis does not hold for some countries. This paper utilizes panel data estimation techniques to compute OCA indices that help assess the OCA endogeneity hypothesis and signal current external and fiscal imbalances.

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Paper provided by University of Evora, CEFAGE-UE (Portugal) in its series CEFAGE-UE Working Papers with number 2011_01.

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Length: 21 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:cfe:wpcefa:2011_01
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  1. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July.
  2. Martin Cincibuch, David Vávra, 2001. "Toward the European Monetary Union - A Need for Exchange Rate Flexibility?," Eastern European Economics, M.E. Sharpe, Inc., vol. 39(6), pages 23-63, November.
  3. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Is EMU more justifiable ex post than ex ante?," European Economic Review, Elsevier, vol. 41(3-5), pages 753-760, April.
  4. Olivier Blanchard, 2007. "Current Account Deficits in Rich Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 54(2), pages 127-158, June.
  5. Harris Dellas & George S.Tavlas, 2009. "An Optimum-Currency-Area Odyssey," Working Papers 102, Bank of Greece.
  6. Nikos Christodoulakis, 2009. "Ten years of EMU: convergence, divergence and new policy priorities," LSE Research Online Documents on Economics 23192, London School of Economics and Political Science, LSE Library.
  7. Kurt Geppert & Andreas Stephan, 2008. "Regional disparities in the European Union: Convergence and agglomeration," Papers in Regional Science, Wiley Blackwell, vol. 87(2), pages 193-217, 06.
  8. Robert Shelburne, 2008. "Current Account Deficits in European Emerging Markets," ECE Discussion Papers Series 2008_2, UNECE.
  9. Roman Horvath, 2005. "Exchange rate variability, pressures and optimum currency area criteria: some empirical evidence from the 1990s," Applied Economics Letters, Taylor & Francis Journals, vol. 12(15), pages 919-922.
  10. Rainer Schweickert, 2001. "Assessing the Advantages of EMU-Enlargement for the EU and the Accession Countries: A Comparative Indicator Approach," Kiel Working Papers 1080, Kiel Institute for the World Economy.
  11. Roman Horvath, 2007. "Ready for Euro? Evidence on EU new member states," Applied Economics Letters, Taylor & Francis Journals, vol. 14(14), pages 1083-1086.
  12. repec:ebl:ecbull:v:6:y:2008:i:12:p:1-10 is not listed on IDEAS
  13. Kim, Yoonbai & Chow, Hwee Kwan, 2003. "Optimum currency area in Europe: an alternative assessment," Economics Letters, Elsevier, vol. 81(3), pages 297-304, December.
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