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What kind of region reaps the benefits of a currency union?

Author

Listed:
  • Augusto Cerqua

    (Department of Social Sciences and Economics, Sapienza University of Rome)

  • Roberta Di Stefano

    (Department of Methods and Models for Economics, Territory and Finance, Sapienza University of Rome)

  • Guido Pellegrini

    (Department of Social Sciences and Economics, Sapienza University of Rome)

Abstract

What is the economic impact of joining a currency union? Is this impact heterogeneous across regions? And how does it change in case of a recession? We answer these questions by investigating the economic impact of joining the euro area for the latecomers, i.e., the countries that adopted the euro after 2002. Di erently from previous literature, we use NUTS-2 regions as units of analysis. This novelty allows us to investigate the theoretical predictions of a currency union impact at a more appropriate geographi- cal level. Using a counterfactual approach based on the recently developed kernel balancing estimator, we estimate the overall as well as the disaggre- gated impact of joining the euro area. We find that the adoption of the euro brought about a small positive e ect, which was, however, dampened by the Great Recession. Individual regional estimates suggest heterogeneous returns with benefits accruing mostly to core regions.

Suggested Citation

  • Augusto Cerqua & Roberta Di Stefano & Guido Pellegrini, 2021. "What kind of region reaps the benefits of a currency union?," Working Papers 2/21, Sapienza University of Rome, DISS.
  • Handle: RePEc:saq:wpaper:2/21
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    More about this item

    Keywords

    euro area; accession countries; regional data; kernel balancing estimator;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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