A new look at economic convergence in Europe: a common factor approach
✍ Scribed by Bettina Becker; Stephen G. Hall
- Publisher
- John Wiley and Sons
- Year
- 2009
- Tongue
- English
- Weight
- 538 KB
- Volume
- 14
- Category
- Article
- ISSN
- 1076-9307
- DOI
- 10.1002/ijfe.364
No coin nor oath required. For personal study only.
✦ Synopsis
Abstract
We propose a common factor approach to analyse convergence, which we implement using principal components analysis. We show that this method provides a useful new way of approaching the convergence debate. We apply this technique to a data set of monthly exchange rates of the 12 member countries of the European Monetary Union (EMU) over 1970–2001. Our empirical results neatly capture the convergence patterns related to the various regimes from Bretton Woods towards EMU. The UK's Pound Sterling has been on a gradual convergence path to the Euro, although convergence is less progressed than it was for the EMU countries by 1999. Copyright © 2008 John Wiley & Sons, Ltd.