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Adjustment dynamics and business cycle heterogeneity in the EMU: Evidence from estimated DSGE models

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  • Giovannini, Massimo
  • Hohberger, Stefan
  • Ratto, Marco
  • Vogel, Lukas

Abstract

The paper reviews adjustment dynamics in the EMU on the basis of estimated DSGE models for four large EA Member States (DE, FR, IT, ES). We compare the response of the four countries to identical shocks and find a particularly strong response of employment and wages in ES, a high sensitivity of IT to investment-related shocks, and a comparatively strong impact of global shocks on the DE economy. We also perform counterfactual exercises that apply the estimated shocks and parameters for ES to DE, FR, and IT. The counterfactual simulations suggest that differences in shocks have been important for GDP growth differentials, and together with structural differences also contributed to differences in employment fluctuations across the four countries considered.

Suggested Citation

  • Giovannini, Massimo & Hohberger, Stefan & Ratto, Marco & Vogel, Lukas, 2019. "Adjustment dynamics and business cycle heterogeneity in the EMU: Evidence from estimated DSGE models," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203548, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc19:203548
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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