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Cross-Country Linkages in Europe; A Global VAR Analysis

Author

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  • Yan M Sun
  • Frigyes F Heinz
  • Giang Ho

Abstract

This paper uses the Global VAR (GVAR) model proposed by Pesaran et al. (2004) to study cross-country linkages among euro area countries, other advanced European countries (including the Nordics, the UK, etc.), and the Central, Eastern and Southeastern European (CESEE) countries. An innovative feature of the paper is the use of combined trade and financial weights (based on BIS reporting banks’ external position data) to capture the very close trade and financial ties of the CESEE countries with the advanced Europe countries. The results show strong co-movements in output growth and interest rates but weaker linkages bewteen inflation and real credit growth within Europe. While the euro area is the dominant source of economic influences, there are also interesting subregional linkages, e.g. between the Nordic and the Baltic countries, and a small but notable impact of CESEE countries on the rest of the Europe.

Suggested Citation

  • Yan M Sun & Frigyes F Heinz & Giang Ho, 2013. "Cross-Country Linkages in Europe; A Global VAR Analysis," IMF Working Papers 13/194, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:13/194
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    References listed on IDEAS

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    Cited by:

    1. Marçal, Emerson Fernandes & Cunha, Ronan & Merlin, Giovanni Tondin & Simões, Oscar Rodrigues, 2017. "The aftermath of 2008 turmoil on Brazilian economy: Tsunami or “Marolinha”?," Textos para discussão 459, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    2. repec:eee:inteco:v:150:y:2017:i:c:p:36-56 is not listed on IDEAS
    3. McQuade, Peter & Falagiarda, Matteo & Tirpák, Marcel, 2015. "Spillovers from the ECB's non-standard monetary policies on non-euro area EU countries: evidence from an event-study analysis," Working Paper Series 1869, European Central Bank.
    4. Moisă Altăr & Alexandru-Adrian Cramer & Adam-Nelu Altăr-Samuel, 2015. "Sovereign Financial Asset Market Linkages across Europe During the Euro Zone Debt Crisis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 29-49, December.
    5. Marçal, Emerson Fernandes & Zimmermann, Beatrice Aline & Mendonça, Diogo de Prince & Giovanni, Merlin & Simões, Oscar Rodrigues, 2016. "Assessing global economic activity linkages: an empirical exercise based on global autoregressive regression," Textos para discussão 416, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).

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