Testing Heterogeneity within the Euro Area Using a Structural Multi-Country Model

Eric Jondeau and Jean-Guillaume Sahuc

No 05-06, Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne

Abstract: In this paper, we investigate the sources of heterogeneity within the euro area. For this purpose, we build an optimization-based multi-country model (MCM) that allows different sources of heterogeneity across countries, both in terms of behavior of economic agents and in terms of asymmetry of shocks. Using Bayesian techniques, we estimate the MCM and several constrained versions of this model. We then test different sources of heterogeneity within the euro area. We show that the main source is the asymmetry of shocks affecting the different economies. In contrast, the heterogeneity of behaviors does not seem to be of empirical relevance for the euro area.

Keywords: Euro area; heterogeneity; Bayesian econometrics; multi-country model (search for similar items in EconPapers)
JEL-codes: C51 C52 F41 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2005
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Citations: View citations in EconPapers (4)

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