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http://ssrn.com/abstract=631522
 
 

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The Anticipated and Concurring Effects of the EMU: Exchange Rate Volatility, Institutions and Growth


Michele Bagella


University of Rome II - Faculty of Economics

Leonardo Becchetti


University of Rome II - Faculty of Economics

Iftekhar Hasan


Fordham University; Bank of Finland

September 2004

Bank of Finland Discussion Paper No. 15/2004

Abstract:     
Reduced exchange rate volatility and higher and less heterogeneous quality of institutional rules and macroeconomic policies are two of the main (anticipated and concurring) effects expected from a currency union. In this paper we measure the magnitude of these two effects on the Euro area countries, looking at real effective exchange rates (REER) and at different indicators of quality of institutional rules and macroeconomic policies (QIRMP). We find that the first effect is much stronger than the second when we compare relative changes on Euro area countries and the rest of the world in the relevant period. We further evaluate the impact of both effects on economic growth on a larger sample of countries. Our findings show that both have significant impact on levels (more robust) and on rates of growth (weaker) of per capita GDP.

Number of Pages in PDF File: 42

Keywords: Real exchange rate, volatility, institutional rules, macroeconomic policy

JEL Classification: F15, F31

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Date posted: December 14, 2004  

Suggested Citation

Bagella, Michele and Becchetti, Leonardo and Hasan, Iftekhar, The Anticipated and Concurring Effects of the EMU: Exchange Rate Volatility, Institutions and Growth (September 2004). Bank of Finland Discussion Paper No. 15/2004. Available at SSRN: http://ssrn.com/abstract=631522 or http://dx.doi.org/10.2139/ssrn.631522

Contact Information

Michele Bagella (Contact Author)
University of Rome II - Faculty of Economics ( email )
Via Columbia n.2
Rome, rome 00100
Italy
Leonardo Becchetti
University of Rome II - Faculty of Economics ( email )
Via Columbia, 2
I-00133 Rome
Italy
Iftekhar Hasan
Fordham University ( email )
113 West 60th Street
New York, NY 10023
United States
Bank of Finland ( email )
P.O. Box 160
Helsinki 00101
Finland
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