Approaching Monetary Integration in the Context of the Imperative to Ensure the Sustainable Growth in the EU

Ionel Bostan,Otilia-Roxana Oprea,Ovidiu Stoica

doi:10.3390/su12177065

Ionel Bostan, Otilia-Roxana Oprea + Show 1 more

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https://doi.org/10.3390/su12177065

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Abstract

Sustainable economic growth is an essential objective at the European Union level. The purpose of this paper is to investigate the impact of monetary integration on economic growth, assuming that the introduction of the euro significantly stimulated the process of European financial integration. We used a fixed-effects methodology for panel data for the EU 28 countries for the period 2004–2018. We find that the main factors through which monetary integration contributessignificantly and positively to economic growth areeconomic growth Single Euro Payments Area (SEPA)cards, trade, monetary freedom, convergence of interest rates, convergence of exchange rates and cross-border holdings of short-term debt, with significant differences between Eurozone and non-euro countries, which confirms the hypothesis that the introduction of the euro had a significant impact on economic and financial integration.

Highlights

An important step towards tightening up the European financial integration process is the formation of the Economic and Monetary Union (EMU), known as the euro area
The purpose of this paper is to investigate the impact of monetary integration on economic growth, assuming that the introduction of the euro significantly stimulated the process of European financial integration
We find that the main factors through which monetary integration contributessignificantly and positively to economic growth areeconomic growth Single Euro Payments Area (SEPA)cards, trade, monetary freedom, convergence of interest rates, convergence of exchange rates and cross-border holdings of short-term debt, with significant differences between Eurozone and non-euro countries, which confirms the hypothesis that the introduction of the euro had a significant impact on economic and financial integration

Summary

Introduction

An important step towards tightening up the European financial integration process is the formation of the Economic and Monetary Union (EMU), known as the euro area. An effective vision should face the long-term challenges of the EMU, as the euro area is diverse, and policymaking at the national level in line with the single monetary policy may be the most effective method for economic decisions, maintaining an adequate level of competitiveness, convergence and coordination to ensure sustainable economic growth. Monetary integration is another branch of financial integration thatis related to monetary policy and introducing the euro. The monetary integration concept can be defined as waiving exchange rate policies and the use of monetary policy for achieving only national goals; long-run monetary integration means the adoption of a European single currency [2]

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