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How Symmetric are the Shocks and the Shock Adjustment Dynamics between the Euro Area and Central and Eastern European Countries?

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  • MICHAEL FRENKEL
  • CHRISTIANE NICKEL

Abstract

We use a structural vector autoregression model to identify and compare demand and supply shocks between euro area countries and central and eastern European countries (CEECs). The shocks and the shock adjustment dynamics of these countries are also compared to western European EU countries that have not yet adopted the euro. Focusing on the period 1993‐2001, we find that there are still considerable differences in the shocks and in the adjustment process to shocks between the euro area and the CEECs. However, there are indications that the differences between several individual CEECs and the euro area have declined recently.

Suggested Citation

  • 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.
  • Handle: RePEc:bla:jcmkts:v:43:y:2005:i:1:p:53-74
    DOI: 10.1111/j.0021-9886.2005.00546.x
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    1. Melitz, Jacques & Weber, Axel A, 1996. "The Costs/Benefits of a Common Monetary Policy in France and Germany and Possible Lessons for Monetary Union," CEPR Discussion Papers 1374, C.E.P.R. Discussion Papers.
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    3. Boone, Laurence & Maurel, Mathilde, 1998. "Economic Convergence of the CEECs with the EU," CEPR Discussion Papers 2018, C.E.P.R. Discussion Papers.
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    5. Frenkel, Michael & Nickel, Christiane & Schmidt, Günter, 1999. "Some shocking aspects of EMU enlargement," Research Notes 99-4, Deutsche Bank Research.
    6. von Hagen, Jurgen & Neumann, Manfred J M, 1994. "Real Exchange Rates within and between Currency Areas: How Far Away Is EMU?," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 236-244, May.
    7. 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.
    8. Paul R Masson, 1999. "Monetary and Exchange Rate Policy of Transition Economies of Central and Eastern Europe after the Launch of EMU," IMF Policy Discussion Papers 99/5, International Monetary Fund.
    9. Boone, Laurence & Maurel, Mathilde, 1999. "An Optimal Currency Area Perspective of the EU Enlargement to the CEECs," CEPR Discussion Papers 2119, C.E.P.R. Discussion Papers.
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