This presentation is part of: F30-2 International Finance

Euro Effect on Unemployment and Economic Growth from an Intra-EuroTransaction Perspective

Aristidis Bitzenis, Ph.D., Department of International and European Studies, University of Macedonia, Egnatia 156, Thessaloniki, 540 06, Greece, Vasileios A. Vlachos, PhD, International and European Studies, University of Macedonia, 156 Egnatia Str, Thessaloniki, 54006, Greece, and Dimitrios Kalimeris, Ph.D., Public Relations and Communication, Technological Educational Institute of Western Macedonia,, Area of Fourka, Kastoria, Kastoria, 52100, Greece.

OBJECTIVES: The purpose of this study is to assess the effect of the “Euro enhancement on Euro Area’s 12 (EA12) economic growth” on unemployment, and whether this enhancement has a greater effect than domestic investment has on unemployment. The enhancement of the Euro on EA12’s growth is determined by two intra EA12 transactions: exports and inward foreign direct investment (FDI).

DATA & METHOD: The impact of the Euro on unemployment and economic growth of EA12 is tested using a fixed effect model both on a balanced panel of 12 EA countries, and on a panel of 8 EA countries, in order to test the robustness of the results. The time period covered is 8 years due to data availability, from 1999 to 2006. The panel of 8 EA countries consists of Austria, Finland, France, Germany, Italy, Netherlands, Portugal, and Spain; countries for which full data is available for the time period examined. In addition, Belgium, Greece, Ireland, and Luxemburg – data missing for some years – are added for the generation of the balanced panel of 12 EA countries.

RESULTS: The findings of both panels indicate that from an intra EA12 transaction perspective, the enhancement of the Euro on EA12’s economic growth does not decrease unemployment, except for the case of Italy. For the rest of EA12 countries, the Euro enhancement on EA12’s economic growth presents a positive relation to unemployment. In addition, domestic investment is by far superior to EA12 flows – intra EA exports and inward FDI – in the fight against unemployment.


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