European Monetary Union: A Cointegration Analysis
نویسندگان
چکیده
This paper employs systems-based cointegration techniques developed by Johansen (1988, 1995) to determine which European Union countries would form a successful Economic and Monetary Union (EMU), based on long-run behavior of the nominal convergence criteria laid down in the Maastricht treaty. The original 12 European Union countries are analyzed together. Nominal exchange rates, real exchange rates, longterm interest rates, and government budget deficits are each analyzed for co-movements among the 12 countries and various subgroups of them. The results suggest that not all of the 12 original countries of the European Union could possibly form a successful EMU over time, unless several countries made significant adjustments. Please address correspondence to the third author. Tel.: (416) 979 5000 Ext. 7321, Fax: (416) 979 5289, e-mail address [email protected]. This research was supported, in part, by grants from the Social Sciences and Humanities Research Council of Canada to the first two authors. The authors are grateful to the editor and two referees for comments on earlier versions. Revised: April, 1999.
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