Study of Economical Compatibility in the Eurozone and the Role of it in Euro Crisis

Document Type : Research Paper

Authors

1 Professor in economics department at Bahonar university of Kerman

2 Ph.D Student in Shahid Bahonar University of Kerman

Abstract

One of the necessary preconditions to the establishment and stability of optimal currency area is the homogeneity of the economic structure in Member States. But Place with Eurozone currency crisis, the question arises whether the economic structure of the Eurozone countries were homogeneous? Accordingly, this study by using an Econometrics model and estimating it by panel data method, has been discussed this issue. The results show that the level of economic development has a critical role in multiplicity of economic factors affecting the intensifying of business fluctuations and the currency crisis. Accordingly, Germany, in terms of enjoyment a current account surplus and high GDP per capita, is considered as the pattern country in the area. Then we investigated the effects of reduction of structural differences between Germany and other countries on the business fluctuation. The results show that in the countries including; Belgium, Finland, France, Italy and Spain, reducing the difference with Germany (increase) in credit of the banking sector, savings, consumption and labor force participation rates, will intensify trade volatility in these countries. Also, in countries including Cyprus, Greece, Portugal, Estonia, Slovakia, Malta, Latvia, Slovenia, reducing the difference with Germany (increase) in banking sector credit, government spending and fixed capital formation, will led to increase the volatility of balance trade in these countries.

Keywords

References

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Journal of Economic Research (Tahghighat- E- Eghtesadi)
Volume 50, Issue 4 - Serial Number 4
January 2016
Pages 807-834

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History

  • Receive Date: 11 March 2015
  • Revise Date: 17 August 2015
  • Accept Date: 06 October 2015

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