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Adjustment dynamics and business cycle heterogeneity in the EMU: Evidence from estimated DSGE models

Massimo Giovannini (), Stefan Hohberger (), Marco Ratto () and Lukas Vogel ()
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Massimo Giovannini: European Commission – JRC,
Marco Ratto: European Commission – JRC,

No 2018-08, Working Papers from Joint Research Centre, European Commission (Ispra site)

Abstract: The paper reviews adjustment dynamics in the EMU on the basis of estimated DSGE models for four large EA Member States (DE, FR, IT, ES). We compare the response of the four countries to identical shocks and find a particularly strong response of employment and wages in ES, a high sensitivity of IT to investment-related shocks, and a comparatively strong impact of global shocks on the DE economy. We also perform counterfactual exercises that apply the estimated shocks and parameters for ES to DE, FR, and IT. The counterfactual simulations suggest that differences in shocks have been important for GDP growth differentials, and together with structural differences also contributed to differences in employment fluctuations across the four countries considered.

Keywords: Estimated DSGE; adjustment dynamics; business cycles; EMU; counterfactuals (search for similar items in EconPapers)
JEL-codes: E32 F41 F44 F45 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac and nep-opm
Date: 2018-11
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Published by Publications office of the European Union, 2018

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