Endogeneity Analysis of Output Synchronization in the Current and Prospective EMU
The sustainability of European EMU (economic and monetary union) remains an important issue in light of existing plans for enlargement. This article conducts an endogeneity analysis of output synchronization, based on panel data estimation from 1994 to 2013, for different country groups, including core, periphery, central and eastern European countries, northern European countries and the prospective candidate countries, which are expected to adopt the euro over the coming years. The quantification of trade related and direct spillover channels associated with monetary integration provides insight into the relative importance of direct and indirect synchronization gains arising from EMU membership. The use of amplitude and concordance measures of synchronization and a range of estimators enhances robustness. Important endogeneity implications emerge from our analysis.