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On the (A)symmetry of Shocks in EMU: Is it that Shocking?

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  • B.A. Verhoef

Abstract

A disadvantage of EMU is the lack of national monetary policy to absorb country-specific shocks. The seriousness of this depends on the availability of alternative adjustment mechanisms, as well as on the asymmetry of the demand and supply shocks within EMU. The aim of this paper is to analyse empirically whether shocks in EMU became more or less symmetric. The results suggest that within EMU the symmetry of demand shocks increased during the last two decades, whilst the symmetry of the supply shocks also rose but not significantly. This convergence of shocks helps the ECB to determine its monetary stance for the entire Euro zone.

Suggested Citation

  • 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.
  • Handle: RePEc:dnb:wormem:715
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    File URL: https://www.dnb.nl/binaries/wo0715_tcm46-146007.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    demand and supply shocks; EMU; structural vector auto regression; principal components analysis;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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