Core and Periphery in the European Monetary Union: Bayoumi and Eichengreen 25 years later

Nauro F Campos,Corrado Macchiarelli

doi:10.1016/j.econlet.2016.07.040

Abstract

Bayoumi and Eichengreen (1993) establish a EMU core–periphery pattern using 1963–1988 data. We use same methodology, sample, window length (1989–2015), and a novel over-identifying restriction test to ask whether the EMU strengthened or weakened the core–periphery pattern. Our results suggest the latter.

Highlights

✩ We would like to thank, without implicating, Paul De Grauwe, Jarko Fidrmuc, Maurizio Habib, Ayhan Kose, an anonymous referee and seminar participants at NIESR London, Brunel University London, 12th BMRC Annual Conference, European Central Bank and The World Bank for valuable comments on previous versions of this paper
We ask whether the EMU strengthened or weakened the core–periphery pattern
Based on a new over-identifying restriction test, our results suggest that the core–periphery pattern has weakened

Summary

Introduction

✩ We would like to thank, without implicating, Paul De Grauwe, Jarko Fidrmuc, Maurizio Habib, Ayhan Kose, an anonymous referee and seminar participants at NIESR London, Brunel University London, 12th BMRC Annual Conference, European Central Bank and The World Bank for valuable comments on previous versions of this paper. The objective of this paper is to revisit Bayoumi and Eichengreen (1993) in order to evaluate the effect of the EMU on the core–periphery pattern they find using 1963–1988 data. We use the same estimation methodology, sample, and time window (25 years) to replicate their results for 1989–2015. We ask whether the EMU strengthened or weakened the core–periphery pattern. Based on a new over-identifying restriction test, our results suggest that the core–periphery pattern has weakened

Theory

Estimation

Testing for over-identifying restriction

Results