Core and Periphery in the European Monetary Union: Bayoumi and Eichengreen 25 years later

- Bayoumi and Eichengreen (1993) raises concerns about a core-periphery divide pre-EMU.
- Using same estimation method, window and sample, we update their study post-EMU.
- This paper also proposes a new over-identifying restriction core-periphery test.
- The test is used to objectively classify countries into core and periphery.
- We find that the EMU weakened the original core-periphery pattern.

Bayoumi and Eichengreen (1993) establish a EMU core-periphery pattern using 1963-1988 data. We use same methodology, sample, window length (1989-2015), and a novel over-identifying restriction test to ask whether the EMU strengthened or weakened the core-periphery pattern. Our results suggest the latter.