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A new look at economic convergence in Europe: a common factor approach

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preprint
posted on 2007-03-30, 12:58 authored by Bettina Becker, Stephen G. Hall
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.

History

School

  • Business and Economics

Department

  • Economics

Pages

197179 bytes

Publication date

2007

Notes

This is a working paper. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2007_09.html.

ISSN

1750-4171

Language

  • en