The Effect of the Euro on Economic Stability
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2023-09-15
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en
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This thesis employed a synthetic counterfactual analysis on the effect that the euro has had on economic stability in member states of the eurozone. Two aspects of macroeconomic instability were analyzed: the variability of the growth rate, and the inflation rate. The data indicated strong heterogeneity between both countries and measurements. The euro does not seem to have increased economic instability outright, nor does the introduction itself seem to have led to transitory instability. Some evidence was found however, that euro area member states that are faced with an asymmetric shock experience economic instability that is significantly greater than it would have been if they had not had the euro. Especially Greece, Ireland, and Slovenia seem to have faced an asymmetric shock that has been greatly exacerbated by the adoption of the euro. The results for Ireland seemed the strongest, as these are robust to both measurements, and robust to setting the year of euro accession in 2002. Despite the results of increased instability in the face of idiosyncratic economic situations, the results for inflation ran counter to theoretical expectations, since inflation seems to have had a stabilizing effect on some countries.
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Faculteit der Managementwetenschappen