Euro Area Structural Convergence? A Multi-Criterion Cluster Analysis

26 Pages Posted: 4 Jan 2014

See all articles by Delphine Irac

Delphine Irac

Banque de France

Jimmy Lopez

LEDi; Microeconomic and Structural Analysis Directorate

Date Written: January 2014

Abstract

This paper proposes a classification of the old member countries of the euro area in a structural data rich environment and run a convergence analysis using the same framework. First, we use a clustering approach and identify two structurally distinct groups of countries that are not modified between 1995 and 2007: the South Countries Group (SCG) – composed of Greece, Italy, Portugal and Spain – and the Other Countries Group (OCG). Second, we propose a convergence metrics and reach three key findings: (i) increase over time of the between-group dispersion; (ii) diverging demographics and innovation performance into the OCG, and (iii) an unfortunate convergence towards high labour market duality in the SCG.

Keywords: Cluster Analysis, European Monetary Union, Structural Policies

JEL Classification: C38, E02, F33

Suggested Citation

Irac, Delphine and Lopez, Jimmy, Euro Area Structural Convergence? A Multi-Criterion Cluster Analysis (January 2014). Banque de France Working Paper No. 470, Available at SSRN: https://ssrn.com/abstract=2374369 or http://dx.doi.org/10.2139/ssrn.2374369

Delphine Irac (Contact Author)

Banque de France ( email )

Paris
France

Jimmy Lopez

LEDi ( email )

Boulevard Gabriel
Dijon, Bougogne 21000
France

Microeconomic and Structural Analysis Directorate ( email )

Paris
France

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