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Gains from Integration? An Empirical Hint from the Eurozone

Published online by Cambridge University Press:  26 March 2020

Ku-Hsieh Chen ,
Jen-Chi Cheng ,
Joe-Ming Lee  and
Chih-Chun Chen
Ku-Hsieh Chen
Affiliation:
Department of Applied Economics and Management, National Ilan University, Taiwan, Republic of China. Email: khchen@niu.edu.tw
Jen-Chi Cheng
Affiliation:
Department of Economics, Wichita State University, Wichita, Kansas, USA
Joe-Ming Lee
Affiliation:
Department of Applied Economics, Fo Guang University, Taiwan, Republic of China
Chih-Chun Chen
Affiliation:
Department of Applied Economics and Management, National Ilan University, Taiwan, Republic of China
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Abstract

Has the eurozone (EZ) really gained from integration? This study applied two econometric frameworks, mGARCH and gMMPI, to test this hypothesis, using panel data that span 1996–2014, a total of 19 years, involving the EZ, EU, G8, G20 and some emerging economies. The empirical outcomes initially showed that the EZ economies experienced neither superior output growth nor a better capital market return than non-EZ economies or the pre-EZ period. They further suggested that each EZ country had a higher degree of risk bearing and, as a group, a greater risk linkage. Moreover, the results indicated that the EZ had a higher productivity gain if the risk premium was counted as part of productivity. Nonetheless, the EZ did not show a substantial productivity gain when the effect of the risk factor was controlled. The ratio of risk bearing to risk premium gain was shown to be 1 to 0.97. The general conclusion is that, other than the risk premium, there was no extra productivity gain for the EZ from taking the risk.

Type
Articles
Information
European Review , Volume 28 , Issue 3 , June 2020 , pp. 483 - 512
Copyright
© 2020 Academia Europaea

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