An empirical analysis of the European Union's impact on Spanish economic performance

Catalina Amuedo-Dorantes and Mark Wheeler

Applied Economics, 2001, vol. 33, issue 8, 1001-1008

Abstract: This paper examines the impact that the European Union (EU) has exerted on Spanish economic activity. The empirical analysis is conducted using variance decompositions and historical decompositions derived from a near vector autoregressive (VAR) model. The near VAR includes the exchange rate, the EU's inflation rate and output, and Spain's inflation rate, output, money supply and interest rate. The estimation period begins in 1987, the year after Spain joined the EU, and ends in 1997. The main finding of the analysis is that the EU has significant impacts on the Spanish economy. The paper finds that shocks to EU output explain up to 63% of Spanish output. At longer time horizons, shocks to the EU's inflation rate and output combine to explain over 50% of the forecast error variance in Spanish inflation.

Date: 2001
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DOI: 10.1080/00036840121830

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