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Endogenous OCA Theory: Using the Gravity Model to Test Mundell’s Intuition. CES Working paper, no.125, 2005

Janicki, Hubert P., and Warin, Thierry, and Wunnava, Phanindra V. (2005) Endogenous OCA Theory: Using the Gravity Model to Test Mundell’s Intuition. CES Working paper, no.125, 2005. [Working Paper]

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    Abstract

    This paper presents an empirical assessment of the endogenous optimum currency area theory. This study relies on the original intuition developed by Mundell in 1973. The gravity model is used to empirically assess the effectiveness of the convergence criteria by examining location specific advantages that guide multinational investment within the European Union. A fixed effects model based on a panel data of foreign direct investment (FDI) flows within the EU-15 shows that horizontal investment promotes the diffusion of the production process across the national border. Specifically, the examined Maastricht criteria suggest convergence in interest rate, government fiscal policy, and debt play a significant role in attracting multinational investment.

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    Item Type: Working Paper
    Uncontrolled Keywords: Economic integration, gravity model, endogenous optimum currency area
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > general
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Harvard University, Center for European Studies > CES Working Papers Series
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 19 Aug 2009
    Page Range: p. 15
    Last Modified: 15 Feb 2011 17:58
    URI: http://aei.pitt.edu/id/eprint/9032

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