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Title: A new look at economic convergence in Europe: a common factor approach
Authors: Becker, Bettina
Hall, Stephen G.
Keywords: Convergence
European Monetary Union
Exchange rates
Nominal convergence
Real convergence
Principal components analysis
Issue Date: 2007
Abstract: We propose a common factor approach to analyse convergence, which we implement using principal components analysis. We show that this method provides a useful new way of approaching the convergence debate. We apply this technique to a dataset of nominal and real monthly exchange rates of the twelve member countries of the European Monetary Union over the period 1970-2001. Our empirical results neatly capture the convergence patterns related to the various regimes from Bretton Woods toward EMU. The UK's Pound Sterling has been on a gradual convergence path to the Euro, although convergence is less progressed than it was for the EMU countries by 1999.
Description: This is a working paper. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2007_09.html.
URI: https://dspace.lboro.ac.uk/2134/2747
ISSN: 1750-4171
Appears in Collections:Working Papers (Economics)

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