Has the Euro changed the Business Cycle?

Zeno Enders, Philip Jung (philip.jung@tu-dortmund.de) and Gernot Müller

No 6/2009, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: In this paper we analyze European business cycles before and under EMU. Across the two periods we ?nd 1) a signi?cant decline in real exchange rate volatility, 2) signi?cant changes in cross-country correlations, and 3) the volatility of macroeconomic fundamentals largely un- changed. We develop a two-country business cycle model and show that the calibrated model is able to replicate key features of the data prior to and under EMU.We ?nd that the euro has a strong bearing on the transmission mechanism as cross-country spillovers increase substantially under EMU. As a result, foreign shocks become more and domestic shocks less important in accounting for the (unchanged) volatility of macroeconomic fundamentals.

Keywords: European business cycles; Euro; Optimum Currency Area; EMU; Monetary Policy; Exchange rate regime; Cross-country spillovers (search for similar items in EconPapers)
JEL-codes: E32 F41 F42 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Has the Euro changed the business cycle? (2013)
Working Paper: Has the Euro changed the Business Cycle? (2012)
Working Paper: Has the Euro changed the Business Cycle? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bonedp:62009

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