Estimating the Euro effect with Synthetic Control Method for Eastern Europe
|Author:||Mgr. Martin Janota|
|Year:||2015 - summer|
|Leaders:|| prof. PhDr. Petr Teplý Ph.D.
|Work type:|| Finance, Financial Markets and Banking
|Awards and prizes:|
|Abstract:||This thesis estimates the effect of Euro adoption on newest Eurozone members using synthetic
control method. The effect is estimated on income per capita and GDP growth. Estimates indicate
overall indecisive effect for Slovakia and Malta, neutral effect for Estonia and negative effect for
Slovenia and Cyprus. The cost of Euro for Cyprus is estimated to be as high as 1/3 of GDP per
capita. In some cases the direction of the effect changed before and after the financial crisis. The
quality of inference suffers from low number of observations. Methodological assumptions are
discussed, concluding that quality of Eastern European time series likely causes substantial bias
in the results.