The EMU-REER Spillovers on Southeastern European Economies: A G-VAR Model

Petros Golitsis, Sotirios K. Bellos and Anastasios Alexandridis

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2020, vol. 66, issue 4, 259-290

Abstract: In this paper, we empirically investigate the spillovers of Real Effective Exchange rate of European Monetary Union (EMU-REER) on Industrial Production, Real Effective Exchange rate, Foreign Reserves and interest rates for the South Eastern European (SEE) economies of Bulgaria, Croatia, Greece, North Macedonia, Romania, and Slovenia, using monthly data over 2002–2016. In a global vector autoregressive framework with EMU-REER as a global variable, we show that the EMU variable has a lasting impact on the SEE variables and economies. Specifically, we provide strong evidence that this impact of EMU-REER is not only of a greater importance compared to the importance of the domestic variables, but also that it negatively affects the competitive stance of the investigated SEE economies, which is partly compensated by the lower interest rates that certain SEE countries face in return. Our results offer potential policy implications with respect to monetary policy coordination and discretion.

Keywords: real effective exchange rate; EMU and Southeastern Europe; international spillovers; global vector autoregression analysis; generalized impulse response analysis; transition countries (search for similar items in EconPapers)
JEL-codes: C32 E31 E32 F42 F45 (search for similar items in EconPapers)
Date: 2020
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