Revisiting the External Imbalance Effects of EMU Membership: Identification Fragility and the Limits of Synthetic Control Inference

This paper reassesses the claim that Economic and Monetary Union (EMU) membership generated large external wealth losses among Southern European economies. Replicating the synthetic control estimates of Alcobia et al. (2025), we confirm sizeable post-EMU deteriorations in the net international investment positions (NIIP) of several peripheral economies, particularly Portugal and Greece. However, the estimated e??ects prove highly sensitive to treatment timing, donor-pool composition, predictor selection, and estimator choice. Alternative treatment definitions reveal substantial anticipation e??ects associated with Maastricht convergence and pre-EMU financial integration. Broader donor pools and macro-financial predictor sets frequently alter the magnitude and even the sign of estimated e??ects. Estimates obtained using Augmented SCM, Synthetic Di??erence-in-Di??erences, Interactive Fixed E??ects, and local projections are generally smaller, less stable, and considerably more uncertain than baseline SCM results. We further argue that NIIP deterioration partly reflected convergence dynamics and global financial conditions rather than EMU-specific institutional failures alone.