Download This PaperExamining the Effects of the European Monetary Union Using Propensity Score Matching
33 Pages Posted: 10 Jun 2019 Last revised: 13 Apr 2020
Date Written: May 24, 2019
Abstract
We examine the treatment effects of joining the European monetary union on macroeconomic outcomes in the member countries. Specifically, we apply propensity score analysis to mitigate the self-selection bias associated with the non-random nature of joining the union. The findings suggest joining the union leads to decline in inflation, inflation volatility, real GDP growth and bond yield for the post-EMU formation period. The treatment effects on bond yield and debt show divergent pattern in core and periphery countries after the financial crisis. The bond market in the southern EMU countries benefited disproportionately in the pre-crisis period in terms of lower bond yields.
Keywords: European Monetary Union, Propensity Scores, Treatment Effects
JEL Classification: C14, E4, E5, F3
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