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The Nature of Shocks in Europe and in Germany

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  • Michael Funke

Abstract

The plan for European Monetary Union (EMU) hangs in part on the incidence of aggregate demand and supply shocks in the participating countries. This paper addresses that question empirically, using a bivariate VAR. Identification of the underlying orthogonal demand and supply shocks is achieved using only long‐run restrictions. Data for 16 European countries and 11 West German states (Länder) show that the correlation of shocks among the EU countries is much lower than within Germany. This implies that there remain questions about the advisability of EMU.

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  • Michael Funke, 1997. "The Nature of Shocks in Europe and in Germany," Economica, London School of Economics and Political Science, vol. 64(255), pages 461-469, August.
    • Handle: RePEc:bla:econom:v:64:y:1997:i:255:p:461-469
    DOI: 10.1111/1468-0335.00090
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    Cited by:

    1. Schuster, Florian, 2023. "Spreads auf Staatsanleihezinsen, der EZB-Sicherheitenrahmen und Peripherieprämien in der Eurozone," Papers 277910, Dezernat Zukunft - Institute for Macrofinance, Berlin.
    2. Schuster, Florian, 2023. "Sovereign spreads, central bank collateral frameworks, and periphery premia in the Eurozone," Papers 277915, Dezernat Zukunft - Institute for Macrofinance, Berlin.

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