Working Paper: NBER ID: w19561
Authors: ngel Estrada; Jordi Gal; David López-Salido
Abstract: We study the extent of macroeconomic convergence/divergence among euro area countries. Our analysis focuses on four variables (unemployment, inflation, relative prices and the current account), and seeks to uncover the role played by monetary union as a convergence factor by using non-euro developed economies and the pre-EMU period as control samples
Keywords: macroeconomic convergence; euro area; monetary union; unemployment; inflation
JEL Codes: E24; F31; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Adoption of the euro (F36) | Convergence in unemployment rates across euro area countries (E24) |
| Financial crisis (G01) | Increased dispersion in unemployment rates among euro area countries (E24) |
| Convergence towards low inflation rates (E31) | Not related to the monetary union (F36) |
| Persistent inflation differentials (E31) | Substantial convergence in price levels (E30) |
| Differences in evolution of current account balances (F32) | More closely related to non-price competitiveness factors (F29) |
| Internal devaluation policies (E69) | Not effectively reduce external imbalances without structural reforms (F32) |