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The Euro Crisis and Swedish GDP Growth — A Study of Spillovers

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  • Österholm, Pär

    ()
    (National Institute of Economic Research)

  • Stockhammar, Pär

    ()
    (National Institute of Economic Research)

Abstract

In this paper, a Bayesian VAR model is used to study the effects of euro area shocks on GDP growth in the small open economy of Sweden. A novel feature is that the new policy uncertainty index of Baker et al.(2013) is introduced in the model. The model behaves well in terms of reasonable impulse response functions. The specific effects of the euro crisis are investigated through a historical decomposition which shows that shocks to euro area GDP growth have been a reasonably important factor for Swedish GDP growth, supporting it during 2010 and holding it back thereafter. Generally, shocks to policy uncertainty have held back Swedish GDP growth during the euro crises.

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Bibliographic Info

Paper provided by National Institute of Economic Research in its series Working Paper with number 134.

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Length: 15 pages
Date of creation: 25 Mar 2014
Date of revision:
Handle: RePEc:hhs:nierwp:0134

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Keywords: Small open economy; Bayesian VAR; Policy uncertainty index;

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  1. M. Hashem Pesaran & Til Schuermann & Scott M. Weiner, 2001. "Modelling regional interdependencies using a global error-correcting macroeconometric model," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B4-1, International Conferences on Panel Data.
  2. Bilge Erten, 2012. "Macroeconomic transmission of eurozone shocks to emerging economies," Working Papers 2012-12, CEPII research center.
  3. Eduardo Levy Yeyati & Martín González Rozada, 2005. "Global Factors and Emerging Market Spreads," Business School Working Papers globalfactorsspreads, Universidad Torcuato Di Tella.
  4. Michael ARTIS & Ana Beatriz C. GALVÃO & Massimiliano MARCELLINO, 2003. "The transmission mechanism in a changing world," Economics Working Papers ECO2003/18, European University Institute.
  5. Fabio Bagliano & Claudio Morana, 2010. "Business cycle comovement in the G-7: common shocks or common transmission mechanisms?," Applied Economics, Taylor & Francis Journals, vol. 42(18), pages 2327-2345.
  6. Tamim Bayoumi & Andrew Swiston, 2009. "Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries," IMF Staff Papers, Palgrave Macmillan, vol. 56(2), pages 353-383, June.
  7. Adolfson, Malin & Andersson, Michael K. & Lindé, Jesper & Villani, Mattias & Vredin, Anders, 2005. "Modern Forecasting Models in Action: Improving Macroeconomic Analyses at Central Banks," Working Paper Series 188, Sveriges Riksbank (Central Bank of Sweden), revised 01 Jun 2006.
  8. Bilge Erten, 2012. "Macroeconomic Transmission of Eurozone Shocks to Emerging Economies," Economie Internationale, CEPII research center, issue 131.
  9. Ashoka Mody & Mark P. Taylor, 2003. "The High-Yield Spread as a Predictor of Real Economic Activity: Evidence of a Financial Accelerator for the United States," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 3.
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