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Output Volatility and Its Transmission in Transition Economies: Implications for European Integration


  • Hegerty, Scott W.

    () (Northeastern Illinois University)


Following the 2008 financial crisis, the world’s attention was drawn to the periphery of the European Union, where economic openness and pegs to the Euro combined to destabilize the region. This study measures the output volatility of a set of Central and Eastern European countries from the early 1990s to 2011 using Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and GARCH-in-Mean models. Volatility “spillovers” are then tested with Vector Autoregressive and Multivariate GARCH techniques. Overall, six countries can be modeled as a GARCH process, and for three of these, volatility significantly reduces output growth. Volatility comovements are particularly strong among the Visegrad countries, while Romania seems fairly insulated from external shocks. This asymmetry of responses to other CEE countries and to foreign shocks suggests that expanding the Eurozone may lead to adjustment problems.

Suggested Citation

  • Hegerty, Scott W., 2012. "Output Volatility and Its Transmission in Transition Economies: Implications for European Integration," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 27, pages 520-536.
  • Handle: RePEc:ris:integr:0584

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    References listed on IDEAS

    1. Michael Faye & John McArthur & Jeffrey Sachs & Thomas Snow, 2004. "The Challenges Facing Landlocked Developing Countries," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 5(1), pages 31-68.
    2. MacKellar, Landis & Woergoetter, Andreas & Woerz, Julia, 2000. "Economic Development Problems of Landlocked Countries," Transition Economics Series 14, Institute for Advanced Studies.
    3. Christopher GRIGORIOU & Céline CARRERE, 2008. "Landlockedness, Infrastructure and Trade:New Estimates for Central Asian Countries," Working Papers 200801, CERDI.
    4. Hemanta Shrestha & Dennis Heffley, 2003. "Regional Integration and Industrial Location in a Landlocked Spatial Economy," Working papers 2003-07, University of Connecticut, Department of Economics.
    5. Borchert, Ingo & Gootiiz, Batshur & Grover, Arti & Mattoo, Aaditya, 2012. "Landlocked or policy locked ? how services trade protection deepens economic isolation," Policy Research Working Paper Series 5942, The World Bank.
    6. K. Shrestha, Hemanta & P. Upadhyay, Mukti, 2004. "Political Economy of Regional Trading Arrangements in South Asia," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 19, pages 427-446.
    7. De, Prabir, 2006. "Trade, Infrastructure and Transaction Costs: The Imperatives for Asian Economic Cooperation," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 708-735.
    8. Grigoriou, Christopher, 2007. "Landlockedness, infrastructure and trade : new estimates for central Asian countries," Policy Research Working Paper Series 4335, The World Bank.
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    Cited by:

    1. Scott W. Hegerty, 2015. "Interest-Rate Volatility in the Baltics: Issues of Measurement and International Contagion," Eastern European Business and Economics Journal, Eastern European Business and Economics Studies Centre, vol. 1(1), pages 12-27.
    2. repec:taf:regstd:v:50:y:2016:i:11:p:1849-1862 is not listed on IDEAS
    3. Markus Eller & Jarko Fidrmuc & Zuzana Fungáčová, 2016. "Fiscal Policy and Regional Output Volatility: Evidence from Russia," Regional Studies, Taylor & Francis Journals, vol. 50(11), pages 1849-1862, November.

    More about this item


    Volatility; Output; Transition Economies; Vector Autoregression; GARCH;

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics


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