The impossible trinity of developing countries – the Greek example

Marko Ðogo (), Dragan Gligoriæ (), Miloš Grujiæ () and Boško Mekinjiæ ()
Additional contact information
Marko Ðogo: University of East Sarajevo, Faculty of Economics, Sarajevo, Bosnia and Herzegovina
Dragan Gligoriæ: University of Banja Luka, Faculty of Economics, Banja Luka, Bosnia and Herzegovina.
Miloš Grujiæ: The Independent University of Banja Luka in Banja Luka, Faculty of Economics, Banja Luka, Bosnia and Herzegovina
Boško Mekinjiæ: University of Banja Luka, Faculty of Economics, Banja Luka, Bosnia and Herzegovina

Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, 2023, vol. 41, issue 1, 271-297

Abstract: The mobility of factors of production from the very beginnings of the theory of the optimal currency area (OCA) stands out as one of the primary mechanisms for achieving a balance of payments, i.e. sustainability of the monetary union (Mundell criterion). However, there is a significant qualitative difference between the monetary union of countries with similar income levels and the one with different development stages Namely, in the first case, labor mobility, as a rule, has short-term economic effects, while it has a longer-term (more negative) impact – especially on the long-run aggregate supply (LRAS). Many Eastern European countries, which expressed a desire to become part of European integration and the monetary union after the communist ruin, experienced this. In a previous paper, the authors set the thesis about “Impossible Trinity of Developing Countries”. In this paper, the aspiration is to confirm the validity of this theory by analyzing Greece within the period 1999-2020, specifically observing the impact of three variables (fiscal policy, social development level, and level of economic freedom) on the emigration of the population under conditions of monetary union and labor force mobility. The results obtained in this research indicate that the fiscal policy in the observed period was the most significant factor in explaining migration trends. The implications for developing countries that are currently entering (such as Croatia) or intend to enter the monetary union with more developed countries in the future are particularly significant.

Keywords: impossible trinity; optimal currency area; migration; developing countries (search for similar items in EconPapers)
JEL-codes: F45 O1 O15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.efri.uniri.hr/upload/03-Djogo_et_al-2023-1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rfe:zbefri:v:41:y:2023:i:1:p:271-297

Access Statistics for this article

More articles in Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics from University of Rijeka, Faculty of Economics and Business Contact information at EDIRC.
Bibliographic data for series maintained by Danijela Ujcic ().