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The Nature of Shocks in Europe and in Germany

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  • Funke, Michael

Abstract

The plan for European Monetary Union (EMU) hangs in part on the incidence of aggregate demand and supply shocks in the participating countries. This paper addresses that question empirically using a bivariate VAR. Identification of the underlying orthogonal demand and supply shocks is achieved using only long-run restrictions. Data for sixteen European countries and eleven West German states (Lander) show that the correlation of shocks among the EU countries is much lower than within Germany. This implies that there remain questions about the advisability of EMU. Copyright 1997 by The London School of Economics and Political Science

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  • Funke, Michael, 1997. "The Nature of Shocks in Europe and in Germany," Economica, London School of Economics and Political Science, vol. 64(255), pages 461-469, August.
  • Handle: RePEc:bla:econom:v:64:y:1997:i:255:p:461-69
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    Cited by:

    1. Siebert, Horst, 1998. "The Euro: A dozen do's and don't's," Kiel Discussion Papers 312, Kiel Institute for the World Economy (IfW).
    2. B.A. Verhoef, 2002. "On the (A)symmetry of Shocks in EMU: Is it that Shocking?," WO Research Memoranda (discontinued) 715, Netherlands Central Bank, Research Department.
    3. Peter Mikek, 2009. "Shocks to New and Old Europe: How Symmetric?," Journal of Common Market Studies, Wiley Blackwell, vol. 47, pages 811-830, September.
    4. Horvath, Julius, 2003. "Optimum currency area theory : A selective review," BOFIT Discussion Papers 15/2003, Bank of Finland, Institute for Economies in Transition.
    5. Natacha Gilson, 2006. "How to be Well Shod to Absorb Shocks? Shock Synchronization and Joining the Euro Zone," CESifo Working Paper Series 1878, CESifo Group Munich.
    6. Fidrmuc, J. & Horváth, J., 1998. "Stability of Monetary Unions : Lessons from the Break-Up of Czechoslovakia," Discussion Paper 1998-74, Tilburg University, Center for Economic Research.
    7. Juan Luís Ollero & Raul Ramos & Jordi Suriñach-Caralt, 2001. "Macroeconomic implications of EMU at the regional level," ERSA conference papers ersa01p146, European Regional Science Association.
    8. Horvath, Julius & Ratfai, Attila, 2004. "Supply and demand shocks in accession countries to the Economic and Monetary Union," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 202-211, June.
    9. Tatiana Cesaroni, 2013. "Economic integration and industrial sector fluctuations: evidence from Italy," Economics Bulletin, AccessEcon, vol. 33(2), pages 944-958.
    10. Bastiaan A. Verhoef, 2003. "The (A)Symmetry of shocks in the EMU," DNB Staff Reports (discontinued) 106, Netherlands Central Bank.
    11. Gilson, Nathalie alias Natacha & Labondance, Fabien, 2013. "Synchronisation des chocs d’offre et de demande en Europe – Un après-euro ou une après-crise des subprimes ?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 89(3), pages 155-189, Septembre.
    12. Fidrmuc, Jan, 1999. "Stochastic Shocks and Incentives for (Dis)Integration," CEPR Discussion Papers 2104, C.E.P.R. Discussion Papers.
    13. Raul Ramos & Miquel Clar & Jordi Suri?ach, 1998. "Specialization in Europe and asymmetric shocks: Potential risks of EMU," ERSA conference papers ersa98p86, European Regional Science Association.
    14. Thiam Hee NG, 2002. "Should The Southeast Asian Countries Form A Currency Union?," The Developing Economies, Institute of Developing Economies, vol. 40(2), pages 113-134, June.
    15. Patrick A. Puhani, 2001. "Labour Mobility: An Adjustment Mechanism in Euroland? Empirical Evidence for Western Germany, France and Italy," German Economic Review, Verein für Socialpolitik, vol. 2(2), pages 127-140, May.
    16. Van Els, Peter & Peeters, Marga, 1999. "De baten van een gemeenschappelijke Europese munt
      [The benefits of a common European currency]
      ," MPRA Paper 28714, University Library of Munich, Germany.
    17. Siebert, Horst, 2000. "The Euro: The issues for the future," Kiel Discussion Papers 361, Kiel Institute for the World Economy (IfW).
    18. Kenen, Peter B., 2000. "Currency areas, policy domains, and the institutionalization of fixed exchange rates," LSE Research Online Documents on Economics 20170, London School of Economics and Political Science, LSE Library.
    19. Legrand, Romain, 2014. "Euro introduction: Has there been a structural change? Study on 10 European Union countries," Economic Modelling, Elsevier, vol. 40(C), pages 136-151.
    20. Horvath, Julius & Jonas, Jiri, 1998. "Exchange rate regimes in the transition economies: Case study of the Czech Republic: 1990-1997," ZEI Working Papers B 11-1998, University of Bonn, ZEI - Center for European Integration Studies.
    21. Siebert, Horst, 1998. "Die Europäische Währungsunion: was zu tun und was zu lassen ist," Kiel Working Papers 854, Kiel Institute for the World Economy (IfW).
    22. János Gács, 2003. "Transition, EU Accession and Structural Convergence," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(3), pages 271-303, September.
    23. Michael Frenkel & Christiane Nickel, 2005. "How Symmetric are the Shocks and the Shock Adjustment Dynamics between the Euro Area and Central and Eastern European Countries?," Journal of Common Market Studies, Wiley Blackwell, vol. 43(1), pages 53-74, March.
    24. Frenkel, Michael & Nickel, Christiane, 2005. "New European Union members on their way to adopting the Euro: An analysis of macroeconomic disturbances," Global Finance Journal, Elsevier, vol. 15(3), pages 303-320, February.
    25. Puhani, Patrick A., 1999. "Labour Mobility - An Adjustment Mechanism in Euroland?," IZA Discussion Papers 34, Institute for the Study of Labor (IZA).

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