The Anticipated Effects of EU Enlargement: Exchange Rate Volatility,Institutions and Conditional Convergence |
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| Authors: | Leonardo Becchetti Iftekhar Hasan Paul Wachtel |
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| Affiliation: | (1) Faculty of Economics, Tor Vergata University, Rome, Italy;(2) Rensselaer Polytechnic Institute and Bank of Finland, Troy, NY, USA;(3) Stern School of Business, New York University, New York, NY, USA |
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| Abstract: | Improvement of economic policies and institutions and reduced exchange rate volatility are two expected effects arising when candidates develop prerequisites needed to qualify for EU membership. In this paper, we evaluate whether these two effects occurred in the Eastern European accession countries by inspecting exchange rate volatility and the evolution of different indicators of the quality of institutions before and after the start of the negotiation period. We then evaluate the impact of both effects on growth of real per capita GDP. By comparing the effects on accession countries to a group of control countries, including transition non candidates, we find that the prospect of accession has a significant effect on output growth, which starts materializing much before accession and even before the beginning of the negotiations with the EU.
Electronic supplementary material The online version of this article (doi:) contains supplementary material, which is available to authorized users. |
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| Keywords: | EU enlargement Exchange rates Convergence |
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