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Domestic Versus International Determinants Of European Business Cycles: A GVAR Approach

  • Melisso Boschi
  • Massimiliano Marzo
  • Simone Salotti

We investigate the sources of macroeconomic (output and inflation) variability in selected European countries within and outside the European Monetary Union: Germany, Italy, Austria, the UK and Poland. Using quarterly data from 1985:1 to 2005:4, we estimate a Global Vector Autoregressive (GVAR) model that includes fifteen countries and regions, covering more than 90 per cent of the World GDP. We find that domestic factors explain most of the macroeconomic variability over the short horizon, i.e. from zero to four quarters, but become progressively dominated by international ones at larger horizons. Regional factors appear to be particularly important. As for output, we detect no significant differences between countries currently members of the European Monetary Union and non-members. As for inflation, on the contrary, regional factors are more influential than those of the rest of the world for the EMU member countries, differently from non-members..

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Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2013-28.

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Length: 24 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:een:camaaa:2013-28
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