The effects of macroeconomic stability on European economic resilience : a focus on the last decade

Abstract

The dissertation analyses the role of macroeconomic stability in the European Union, exploring the degree of resilience expressed by member states when hit by economic shocks. The first part of the literature provides a definition of macroeconomic stability and how the macroeconomic imbalance procedure scoreboard has been used to measure stability and resilience. In this research, resilience is understood as a byproduct of macroeconomic stability, with the main hypothesis being that countries with high stability are quicker to recover from economic shocks. To test this hypothesis, this research looked at two main shocks, the 2008 financial crisis and the 2010 European debt crisis. The concept of governance is also explored in the literature review, specifically looking at the definition of governance given by the six indicators developed by Kaufmann, which measure good governance. This section was developed in order to explore another hypothesis, that of macroeconomic stability, and then resilience, linked to good governance. The research applies a quantitative methodological approach, using descriptive statistics to assess member states' performance over a period of ten years. The assessment of resilience is based on the framework, and applied work, provided by Briguglio et al (2004, 2007). The dissertation finds that macroeconomic stability can be used to measure resilience, given that a longitudinal study is applied with a known period of economic shock. The data also suggests that good governance has an effect on how stable or resilient countries are to shock.