Institutional quality convergence in the Euro area countries: a note and further evidence

ABSTRACT

A recent paper in this journal examines the presence of convergence or divergence in terms of institutional quality among the Eurozone countries over the period 2008–17. Convergence is a long-term process. Furthermore, it may not follow a smooth and stable course since it can be affected by major episodes such as the recent crisis and the recession that afflicted Eurozone countries. Better insights can be drawn with the use of timeseries spanning over a longer period and by allowing for structural shifts in the process caused by important episodes and major events.

KEYWORDS:

• Convergence
• institutions
• unit roots
• structural breaks
• Euro area

Acknowledgments

The authors wish to sincerely thank an anonymous referee for constructive suggestions and for spotting flaws and typos in an earlier version. The usual disclaimer applies.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. Defined and adopted by the 1993 European Council in Copenhagen. https://ec.europa.eu/neighbourhood-enlargement/policy/glossary/terms/accession-criteria_en

2. https://govdata360.worldbank.org/indicators/gci?country=BRA&indicator=632&viz=line_chart&years=2007,2017 Pérez-Moreno, Bárcena-Martín, and Ritzen (2020) use 2008, the year that the global financial crisis emerged, as the starting point of their analysis.

3. The other two WGI indices being Voice and Accountability, Political Stability and Absence of Violence.

4. http://info.worldbank.org/governance/wgi

5. The WGI indices’ values for the years 1997, 1999 and 2001 are not available. For our purposes here, they were estimated by averaging the value of the preceding and the following year. These imputations do not affect the trend exhibited by each of the four series.

6. These countries are: Cyprus, Estonia, Malta, Latvia, Lithuania, Slovakia and Slovenia.