The Nature of Shocks in Europe and in Germany

Michael Funke

Economica, 1997, vol. 64, issue 255, 461-469

Abstract: The plan for European Monetary Union (EMU) hangs in part on the incidence of aggregate demand and supply shocks in the participating countries. This paper addresses that question empirically, using a bivariate VAR. Identification of the underlying orthogonal demand and supply shocks is achieved using only long‐run restrictions. Data for 16 European countries and 11 West German states (Länder) show that the correlation of shocks among the EU countries is much lower than within Germany. This implies that there remain questions about the advisability of EMU.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:bla:econom:v:64:y:1997:i:255:p:461-469

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