Economic convergence is at the heart of European Union integration. The importance of this objective has not diminished over time, and it is especially relevant in light of the economic crisis that has exacted a heavy toll on EU countries and created scepticism about the merits of EU policies....

The extraordinary events surrounding the Great Recession have cast a considerable doubt on the traditional sources of macroeconomic instability. In their place, economists have singled out financial and uncertainty shocks as potentially important drivers of economic fluctuations. Empirically...