Testing the Asymmetry of Shocks with Euro Area

Marius Marinas

Theoretical and Applied Economics, 2012, vol. XVIII(2012), issue 1(566), 5-20

Abstract: The objective of this study is to identify the demand and supply shocks affecting 13 EU member states and to estimate their degree of correlation with the Euro area shocks. This research ensures identifying the asymmetry of shocks degree with the monetary union, depending on which it’s judging the desirability of adopting a single currency. The analysis is also useful for the economies outside the Euro area, because they are strongly commercial and financial integrated especially with the core economies from union. Applying the Blanchard and Quah methodology to estimate the shocks in the period from 1998:1- 2010:3, I have found a weak and negative correlation between demand shocks and a medium to high correlation of the supply shocks. The results obtained suggest the presence of a structural convergence process with the Euro area, in the context of domestic macroeconomic policies rather different, both inside and outside the monetary union.

Keywords: demand shocks; supply shocks; SVAR model; Euro area; asymmetric shocks. (search for similar items in EconPapers)
Date: 2012
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