engleski

The impact of the European Monetary Union accession on the convergence of unemployment rates between the member countries

The goal of this paper is to determine if the accession to the European Monetary Union (EMU) had an impact on the labor markets of the EMU countries. The hypothesis of the paper is that EMU contributed to the economic integration and convergence of the unemployment rates in the euro area. The paper thus analyses the persistence of unemployment rates in the analyzed EMU countries and seeks to determine the role of the EMU in the convergence patterns of the unemployment rates between them. The paper employs unit root testing methodology to analyze the persistence of unemployment rates in the EMU countries and to test the convergence of the unemployment rates among EMU countries after the introduction of euro. In order to estimate the total number and location(s) of structural break(s) in the unemployment rates as well as their convergence patterns structural break testing is employed. Our analysis is interesting because the locations of breaks are endogenously estimated, providing an information on the statistical significance of the impact of EMU on the labor markets for the each of the analyzed countries. Data used in the analysis are the seasonally adjusted quarterly unemployment rates and the ratio of each country's unemployment rates relative to the average unemployment rates of all countries in the EMU covering the period from 1995q1 to 2016q2. Results indicate that there was a convergence in the unemployment rates across the most of the euro area countries following the creation of EMU.

Unemployment ; European Monetary Union ; Convergence ; Unit root ; Structural breaks

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