Iranian Journal of Economic Research

An Analysis of DID in Investigating the Impact of Currency Unions on North-South Income Convergence

Authors

Seyed Komail Tayebi 1
Hoshang Shajari 1
Mohamad Vaez Barazani 2
Ahmad Googerdchain 3

1 Associat Professor,University of Isfahan

2 Assistant Professor,University of Isfahan

3 Ph.D Candidate,University of Isfahan

Abstract
The expansion of international trade has influenced deeply many economies to converge (Slaughter 1998). Now a question can be raised whether the establishment of an economic union (a currency union, for instance) can lead to income convergence or it may cause income divergence between members of that union.
     This paper examines whether the membership of countries in a block for trade expansion enables their economies to move toward income convergence, while the result should be different between countries in north, or north and south. To this end, the objective, the paper uses a difference-indifferences (DID) analysis to measure the rate of income convergence (divergence) before and after establishing a currency union. The results obtained approve that the implementing of currency union affects significantly and directly income convergence in the world, while this effect in much more pronounced in North-South countries than of North-South ones.   
 

Keywords

Financial globalization
currency union
income convergence
difference-in-differences (DID) approach

  • Receive Date 03 May 2016
  • First Publish Date 03 May 2016

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