Shocking aspects of monetary integration (SVAR approach)
AbstractOne of the most challenging areas relating to the European Monetary Union (EMU) enlargement is the question of new member countries’ vulnerability to exogenous shocks related to euro adoption. Even if well prepared, and also considering the business cycles of the EMU candidate countries became more correlated as the result of persisting convergence toward the old EU member countries, their real output will be still vulnerable to the exogenous structural disturbances. The responsiveness of the new EMU member countries’ real output to the exogenous shocks may of course differ in intensity and durability. If we also assume a possibly low shocks correlation in these countries, the overall short-term wealth effect of the EMU membership may be rather low or even negative at all. In the paper we analyze the impact of three common exogenous structural shocks on the real output development in the new EMU member countries (Cyprus, Malta, the Slovak Republic and Slovenia) in the period 1999-2008 using SVAR (structural vector autoregression) approach. In order to meet this objective we decompose the variability of the real GDP in these countries to permanent and temporary shocks (we assume three types of shocks - nominal (liquidity), demand and supply shocks). Impulse-response functions will be also computed so that we can estimate the behaviour of the real output after structural one standard deviation innovations. The relevant outcomes of the analysis we compare with the results of the tests for the whole euro area (represented here by old EU member countries - EU-12 group). This approach helps us to understand the common as well as differing features of the real output determination in the new EMU member countries and old EU member countries.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 17057.
Date of creation: Jun 2009
Date of revision:
Publication status: Published in Journal of Applied Research in Finance 1.1(2009): pp. 52-63
exogenous shocks; real output; structural vector autoregression; variance decomposition; impulseresponse function;
Other versions of this item:
- Rajmund MIRDALA, 2009. "Shocking Aspects Of Monetary Integration (Svar Approach)," Journal of Applied Research in Finance Bi-Annually, ASERS Publishing, vol. 0(1), pages 52-62, June.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-05 (All new papers)
- NEP-EEC-2009-09-05 (European Economics)
- NEP-MAC-2009-09-05 (Macroeconomics)
- NEP-MON-2009-09-05 (Monetary Economics)
- NEP-TRA-2009-09-05 (Transition Economics)
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