The anticipated and concurring effects of the EMU: exchange rate volatility, institutions and growth |
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Authors: | Michele Bagella Leonardo Becchetti Iftekhar Hasan |
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Affiliation: | a Università Tor Vergata, Roma, Facoltà di Economia, Dipartimento di Economia e Istituzioni, Via Columbia 2, 00133, Roma, USA;b The Lally School of Management, Rensselaer Polytechnic Institute 518 276-2525, 110 8th Street Pittsburgh Building, Troy, NY 12180, USA;c Bank of Finland, 00101 Helsinki, Finland |
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Abstract: | Reduced exchange rate volatility and higher and less heterogeneous quality of institutional rules and macroeconomic policies are two of the main (anticipated and concurring) effects expected from a currency union.In this paper, we measure the magnitude of these two effects for the Eurozone countries looking at real effective exchange rates (REER) and at different indicators of quality of institutional rules and macroeconomic policies (QIRMP). We find that the first effect is much stronger than the second when we compare relative changes for Eurozone countries and the rest of the world in the relevant period.We further evaluate the impact of both effects on economic growth on a larger sample of countries. Our findings show that both have significant impact on levels (more robust) and on rates of growth (weaker) of per capita GDP. |
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Keywords: | EMU Quality of institutions Exchange rate volatility |
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