Please use this identifier to cite or link to this item: https://dspace.auca.kg/handle/123456789/671
Title: The Economic impact of European Integration
Authors: Damirbek kyzy, Eliza
Issue Date: May-2011
Abstract: Indeed, Europe nowadays not is that one that the history has known for ages. Split by strict territorial borders, nations that constitute eternal enemies, seeking to invade new territories, never ending wars. This Europe is gone into the past. In the new millennium, the history has encompassed one more astonishing and in some way inspiring reconstruction in the west of the Eurasian continent: creation of the first organization that consists of 27 member states with their difference in language, historical background, economic situation, social infrastructure, and…basically, in everything, the EU has proved herself to be inspiring example of integration that can be reached by common consent and efforts, put by each of the included member country. Admittedly, as benefits of the common currency shared among 17 MS, European Commission points out low inflation rates, which in its turn promotes cheaper government borrowing and social cohesion within the country, improves healthiness of the country’s economy before and after the entrance to the euro area, and the single currency makes the country’s economy more resistant to external shocks by uniting economies into supranational level. Nevertheless, there is a certain euro skepticism on whether the adoption of the single currency increased economic welfare of the euro area MS. Hence arises question was that so-called deepening of integration beneficial? Have joined countries reached their targets? What kind of impact had joining the Eurozone has had on the economies of the MS? This paper studies the change in economic situation in countries that are the MS of the euro area and whether they are affected by economic integration of Europe. The main goal is to analyze such economic indicators as Gross Domestic Product per capita, net Foreign Direct Investment, and current account balance of the MS of the Eurozone and evaluate influence of the adoption of the euro on these factors. Moreover, the countries will be divided to three II groups according to their income per capita in order to see whether the countries with low income benefited more or less than the high income group. This resulted in a hypothesis that is going to be tested: European economic integration had a positive effect on the economies of the Eurozone Member States. As a result of the research in this paper, it can be deducted that the euro proved to be a good motivator of inward investment. Exceptionally high surge of foreign direct investment began shortly before EMU both in Eurozone as well as outside of the Eurozone. Inflows fell sharply afterwards though, still the increase in the period after EMU was considerable. Estimates of euro economies appear to support the euro hypothesis: the substantial rise in FDI after EMU that is post-EMU period to a moderate level above pre-EMU trend. These figures indicate that the offsets in current account deficit can be easily complemented by the FDI flows. As for the income growth, there was a radical change in the average GDP per capita growth after the adoption of the single currency. As for the grouping the countries and connecting the benefits with the low/middle/high income economies, net flows of direct investment increased substantially after the EMU for all of the countries and for low-income countries in particular, though there were imbalances in the trend; the GDP per capita’s average growth has increased significantly for all of the country categories, but for high income countries especially; and the current account balance has proved to be dispersed differently by virtue of its trend, but trade surplus is a main trend for the middle income countries during the period of the premonition of adoption of the euro in 1990s. Hence, the hypothesis of this paper that the economic integration of Europe has resulted in positive effect for the economies of the euro areas member states has been partially proved.
URI: http://hdl.handle.net/123456789/671
Appears in Collections:Department of European Studies

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