Searching for the source of macroeconomic integration across advanced economies
Uluc Aysun ()
No 2015-01, Working Papers from University of Central Florida, Department of Economics
This paper estimates a two-country open economy DSGE model by using U.S. and Euro Area data. The baseline model, where the two regions are linked only through the trade of goods and risk-free bonds, fails to replicate the high cross-regional macro-economic correlation in the data. I search for the determinants of this correlation by reconfiguring the model?s shock processes in two ways. First, I include shocks that symmetrically affect each region. Second I allow for the transmission of shocks between the two regions. While both of these changes considerably improve the model?s per-formance along the international dimension, common shocks appear to be the main drivers of cross-regional correlation. Under both speci?cations, comovements of variables are mostly determined by demand and ?nancial shocks. Productivity, cost-push and exchange rate shocks, by contrast, play a limited role.
Keywords: Macroeconomic integration; DSGE; Bayesian estimation; U.S.; Euro Area (search for similar items in EconPapers)
JEL-codes: E32 F41 F42 F44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://economics.itweb.ucf.edu/workingpapers/2015-01.pdf Full text (application/pdf)
Journal Article: Searching for the source of macroeconomic integration across advanced economies (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cfl:wpaper:2015-01
Access Statistics for this paper
More papers in Working Papers from University of Central Florida, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by John Paul ().