Difficult Convergence among the Five Main European Union Countries and the Crisis of the Euro Area
Michele Caputo () and
Francesco Forte ()
Atlantic Economic Journal, 2015, vol. 43, issue 4, 415-430
This paper focuses on the European Union (EU) and European Monetary Union (EMU) as club-governments after an analysis of the characteristics of the union of governments as clubs. Convergence among member countries regarding the parameters relevant for club homogeneity and stability is paramount. We develop empirical research on the convergence path in a model with the five main EU countries, with 15 parameters drawn from neoclassical growth theory and from EU-EMU rules. We examine convergence and stability in the EU club for France, Germany, Italy, Spain and the United Kingdom by measuring their parametric spreads from 2003 (first year of normal circulation of the euro) to 2011. Convergence with growth developed before the great financial fluctuation, then divergence set in. Convergence then reappeared with partial stagnation. Gross domestic product (GDP) was the dominant parameter, while GDP per capita was the least important. The main focus of the paper is on measurement. The results signal the need for changes in institutions and policy tools consistent with the market economy models of the two clubs. Further integration will face the same issues. Copyright International Atlantic Economic Society 2015
Keywords: Convergence; Stability; Club theory; European monetary union; Growth models; E52; E62; H41; O47 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:atlecj:v:43:y:2015:i:4:p:415-430
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