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N° 2007-17 |
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| November |
| Costs and Benefits of Euro Membership: a Counterfactual Analysis |
Emmanuel Dubois
Jérôme Hericourt
Valérie Mignon |
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| The aim of this paper is to gauge quantitatively the macroeconomic costs or gains of EMU
membership. Building on the Global VAR framework designed by Pesaran et al. (2004),
we want to shed light on the following important questions: What if the euro had never
been launched? How would have evolved national outputs and inflation rates? What would
have been the consequences for Italy of not participating to Stage 3? We show that we cannot
draw any general conclusion for the three largest euro area members, namely Germany,
France and Italy. It is however certain that these countries had, and probably still have, conflicting interests regarding the most suitable monetary policy for each of them. Conversely,
small euro area members like Finland, the Netherlands and Spain, seem to have benetted
from the pre-euro convergence and from the single currency regime. Besides, the single currency
regime probably did not have any significant impact on price developments. Finally,
the non-participation of Italy to the single currency is quite neutral on the macroeconomic
performances of the euro area. |
Non-technical summary  |
Résumé
non-technique |
| Full text |
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| Euro; counterfactual analysis; global VAR |
Keywords |
| C32; E17; F42 |
JEL classification |
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