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Real and monetary convergence within the European Union and between the European Union and candidate countries: A rolling cointegration approach

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  • Brada, Josef C.
  • Kutan, Ali M.
  • Zhou, Su

Abstract

We use rolling cointegration to measure the convergence of base money, M2, the consumer price index and industrial output between two reference countries, Germany and France, and recent EU members and some transition economy candidates. Counties that recently joined the EU exhibit time-varying cointegration with the reference countries over much of the 1980-2000 sample period. Cointegration for the transition economies was comparable for M2 and prices, but less so for monetary policy and industrial output. This suggests that a peg to the Euro upon accession is feasible for the East European candidates, but the benefits of joining the Euro zone are as yet limited.

Suggested Citation

  • Brada, Josef C. & Kutan, Ali M. & Zhou, Su, 2002. "Real and monetary convergence within the European Union and between the European Union and candidate countries: A rolling cointegration approach," ZEI Working Papers B 05-2002, University of Bonn, ZEI - Center for European Integration Studies.
    • Handle: RePEc:zbw:zeiwps:b052002
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    3. repec:lan:wpaper:2442 is not listed on IDEAS
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    6. Kleimeier, Stefanie & Sander, Harald, 2006. "Regional versus global integration of euro-zone retail banking markets: Understanding the recent evidence from price-based integration measures," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(3), pages 353-368, July.
    7. Gabrisch, Hubert & Orlowski, Lucjan T., 2009. "A Dynamic Approach to Interest Rate Convergence in Selected Euro-candidate Countries," IWH Discussion Papers 10/2009, Halle Institute for Economic Research (IWH).
    8. A M Spiru, 2007. "Inflation convergence in the new EU member states," Working Papers 590260, Lancaster University Management School, Economics Department.
    9. Hubert Gabrisch & Lucjan T. Orlowski, 2010. "Interest Rate Convergence in Euro-Candidate Countries: Volatility Dynamics of Sovereign Bond Yields," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(6), pages 69-85, November.
    10. Camacho, Maximo & Perez-Quiros, Gabriel & Saiz, Lorena, 2006. "Are European business cycles close enough to be just one?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1687-1706.
    11. Kozmenko, Serhiy & Savchenko, Taras & Kazarinov, Dmytro, 2012. "Assessment of financial convergence of Ukraine with the CIS countries and the European Union," MPRA Paper 50782, University Library of Munich, Germany.
    12. Peleg, Bezalel & Peters, Hans, 2009. "Nash consistent representation of effectivity functions through lottery models," Games and Economic Behavior, Elsevier, vol. 65(2), pages 503-515, March.
    13. Alina M. Spiru, 2008. "Inflation Convergence In Central And Eastern European Economies," Romanian Economic Business Review, Romanian-American University, vol. 3(4), pages 14-34, Winter.
    14. van Hoesel, C.P.M., 2004. "Optimization in telecommunication networks," Research Memorandum 045, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    15. Alina M. Spiru, 2008. "Inflation Convergence In Central And Eastern European Economies," Journal of Information Systems & Operations Management, Romanian-American University, vol. 2(1), pages 289-316, July.

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    More about this item

    Keywords

    European Union; convergence; currency areas; enlargement; cointegration; policy coordination;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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