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PIIGS in the Euro Area. An Empirical DSGE Model

Listed author(s):
  • Alice, Albonico
  • Alessia, Paccagnini
  • Patrizio, Tirelli

We build up and estimate a two-region DSGE model of the Euro area, investigating the interactions between the peripheral countries (PIIGS) and the rest of EMU. Our main focus is on the 2008-2009 financial crisis and on the subsequent 2010-sovereign bond crisis. One striking result is that the two crises are characterized by demand shocks in the core Euro area countries, whereas region-specific permanent technology shocks explain most of output growth slowdown in the PIIGS countries. Our results suggest that the capital flows reversals caused important supply-side e¤ects in the Eurozone periphery.

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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 331.

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Length: 54
Date of creation: 11 Mar 2016
Date of revision: 11 Mar 2016
Handle: RePEc:mib:wpaper:331
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