Dr. Antonakakis Publishes Article in Leading Finance Journal
One can now access, download & read free of charge (until August 29, 2017) the latest publication of the business & management department head, Dr. Nikolaos Antonakakis (co-authored with Christina Christou, Juncal Cunado, Rangan Gupta) published in the Journal of International Financial Markets, Institutions and Money.
This study examines the convergence patterns of Euro Area (EA) 17 countries’ sovereign bond yield spreads (relative to German bund) over the period of March 2002 to December 2015, by employing the convergence algorithm developed by Phillips and Sul (2007). The empirical findings suggest rejection of full convergence across the EA17 countries’ bond yields spreads, and the presence of a certain number of clubs. In particular, three subgroup convergence clubs emerge, with Cyprus, Spain, France, Greece, Ireland, Lithuania, Luxembourg, Latvia, Portugal and Slovenia in the first; Belgium, Italy and Malta in the second; and Austria, Finland, Netherlands and Slovakia in the third club. Moreover, there is also evidence that the first two clubs could be merged to form a larger convergence club. The transitional curves indicate that, despite short-run divergences, EU17 sovereign bond yield spreads tend to converge in the long-run, with the exception of those in Greece and Cyprus, indicating the strong attempts of most of the countries under investigation to adopt fiscal policies that eventually contribute to a convergence pattern.
The distinction of the Eurozone between "North" and "South", often articulated in the media, that tries to stigmatize (in the second case) as PIIGS or GIIPS is misguided, as it is not based on any fundamental separation criteria, but only on extraneous factors and observations. While our research reveals scientifically in an endogenous way and based on the convergence criteria of the Maastricht Treaty, a Eurozone of the following convergence clubs or as some say "two speed Eurozone":
(1) Belgium, France, Greece, Ireland, Spain, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, Portugal and Slovenia
(2) Austria, Germany, Finland, the Netherlands and Slovakia
These findings have substantial implications for the conduct of monetary policy, the (re-)design of the Eurozone and the its viability! Unless action is taken in a timely manner to correct its inefficiencies, the Eurozone project will fall apart!