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Financial Integration and the Construction of Historical Financial Data for the Euro Area

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  • Heather M. Anderson
  • Mardi Dungey
  • Denise R Osborn
  • Farshid Vahid

Abstract

Time series analysis for the Euro Area requires the availability of sufficiently long historical data series, but the appropriate construction methodology has received little attention. The benchmark dataset, developed by the European Central Bank for use in its Area Wide Model (AWM), is based on fixed-weight aggregation across countries with historically distinct monetary policies and financial markets of varying international importance. This paper proposes a new methodology for producing back-dated financial series for the Euro Area, that is based on the time-varying distance of periphery countries from core countries with respect to monetary integration. Historical decompositions of the residuals of vector autoregressive models of the Euro Area economy are then used to explore and compare the monetary policy implications of using the new methodology versus the use of AWM fixed weight series.

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Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 152.

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Length: 37 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:man:cgbcrp:152

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Cited by:
  1. Dungey, Mardi & Osborne, Denise, 2013. "International Transmissions to Australia: The Roles of the US and Euro Area," Working Papers, University of Tasmania, School of Economics and Finance 17208, University of Tasmania, School of Economics and Finance, revised 16 Oct 2013.
  2. Ralf Brüggemann & Jing Zeng, 2012. "Forecasting Euro-Area Macroeconomic Variables Using a Factor Model Approach for Backdating," Working Paper Series of the Department of Economics, University of Konstanz 2012-15, Department of Economics, University of Konstanz.

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