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Shocking Aspects of European Monetary Unification

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  • Tamim Bayoumi
  • Barry Eichengreen

Abstract

Data on output and prices for 11 EC member nations are analyzed to extract information on underlying aggregate supply and demand disturbances using a VAR decomposition. The coherence of the underlying shocks across countries and the speed of adjustment to these shocks are then compared to the results from US regional data. We find that the underlying shocks are significantly more idiosyncratic across EC countries than across US regions, which may indicate that the EC will find it more difficult to operate a monetary union. However a core of EC countries, made up of Germany and her immediate neighbors, experience shocks of similar magnitude and cohesion as the US regions. EC countries also exhibit a slower response to aggregate shocks than US regions, presumably reflecting lower factor mobility.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3949.

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Date of creation: Jan 1992
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Publication status: Published in "Adjustment and Growth in the European Monetary Union", Fransisco Torres and Francesco Giavazzi eds, Cambridge University Press; Cambridge, 1993
Handle: RePEc:nbr:nberwo:3949

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  1. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers.
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  1. One (labour) market, one money.
    by Alberto Bagnai in Goofynomics on 2012-04-22 21:10:00
  2. Scene dalla vita di provincia: prefazione
    by Alberto Bagnai in Goofynomics on 2013-06-27 08:04:00
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