A BEHAVIORAL ANALYSIS OF MACROECONOMIC, FINANCIAL AND SOCIO-ECONOMIC VARIABLES BEFORE AND AFTER THE INTRODUCTION OF COMMON CURRENCY IN EUROPE

Abstract

This article extensively examines the consequences of the Euro's introduction as a common currency in Europe on diverse macroeconomic, financial, and socioeconomic aspects. By utilizing a GARCH model, it assesses the real effective exchange rate's volatility and its impact on economic growth in select European nations. The study also scrutinizes variable convergence across member states using cross-sectional standard deviations, drawing from monthly and annual data spanning 1970 to 2014. Results underscore a significant reduction in average inflation and exchange rate volatility post-Euro adoption, accompanied by diminished fluctuations in cross-country standard deviations. Fixed-effects analysis unveils a shift from a negative to a positive relationship between real effective exchange rate volatility and economic growth post-Euro. Overall, findings suggest widespread benefits for most participating member countries from the Euro's implementation