This paper analyses the response of seven of the newly acceded countries (NACs)to EU supply and monetary shocks. A typical NAC perceives an EU technology disturbance as a positive supply shock and an EU monetary expansion as a negative demand shock. When we split the seven countries into two groups, results for group one which includes the Czech Republic, Hungary, Poland and Slovakia suggest that an EU supply shock feeds through as a demand shock, increasing both prices and output. This hints that trade acts as a strong channel of EU shock propagation. For both groups, monetary disturbances explain a large proportion of NAC’s output fluctuation while technology disturbances account for a significant part of export variations. EU shocks are identified as in Canova and De Nicol´o (2002) using sign restrictions of the cross-correlation function of the variables’ responses to orthogonal disturbances. These restrictions are derived from an SDGE model
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Find related papers by JEL classification: C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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