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The symmetry of demand and supply shocks in the European Monetary Union

Henryk Bąk () and Sebasitan Maciejewski ()
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Henryk Bąk: Warsaw School of Economics, Collegium of World Economy
Sebasitan Maciejewski: PGE Polska Grupa Energetyczna, Risk Department

Bank i Kredyt, 2017, vol. 48, issue 1, 1-44

Abstract: In this paper we apply the Blanchard and Quah (1988) SVAR methodology in order to estimate the size and frequency of demand and supply shocks for the EMU member countries in 1996−2014. Obtained SVAR estimates suggest that Eurozone’s largest economies – Germany, France and Italy – show the greatest similarity with the Eurozone under the criterion of shock correlation and amplitude. In turn, the majority of CEE countries, which are Eurozone’s latest joiners, exhibit relatively low correlations of demand and supply shocks with the euro area. The impact of the global financial crisis on the euro area’s economies is pronounced for all 16 analysed countries between 2008 Q4 and 2009 Q2. The comparison of shock correlations prior to and after the outbreak of the global financial crisis illustrates considerable changes in correlations of demand and supply shocks of individual countries with the euro area, where changes in the correlation of demand shocks are greater in magnitude, and positive changes in the correlation of demand shocks and negative changes in the correlation of supply shocks predominate.

Keywords: time series models; asymmetric shocks; the euro area (search for similar items in EconPapers)
JEL-codes: C32 E3 F36 F44 (search for similar items in EconPapers)
Date: 2017
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