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Spillover of Sentiment in the European Union: Evidence from Time- and Frequency-Domains

Vasilios Plakandaras (), Aviral Tiwari () and Rangan Gupta ()

No 201909, Working Papers from University of Pretoria, Department of Economics

Abstract: The issue of economic integration of the economies consisting the European Union across its various leaps of expansion throughout the years has been brought back to light during the recent sovereign crisis of the southern economies of the Union, that lead to the necessity of large bailout programs. In this paper we depart from the typical approach in the field and examine economic synchronization through the lenses of economic sentiment spillovers based on the economic confidence index for 14 European economies. In doing so, we analyze sentiment spillovers both in time- and in the frequency-domains in order to reveal the dissemination of the perception of economic agents about the future economic climate throughout the EU. Our empirical findings support the segregation of the Union in the core European countries and the southern economies and highlight the role of the Germany as the dominant economy setting the pace for the Union after 2008. Interestingly, large economies as Netherlands and Austria appear to be neutral, not because of an isolation from the region, but due to changing roles in transmitting and accepting expectations about the economic environment.

Keywords: Sentiment; Spillover; Time- and Frequency-Domains; European Union (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2019-02
New Economics Papers: this item is included in nep-eec
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