Mirdala, Rajmund (2009): Shocking aspects of monetary integration (SVAR approach). Published in: Journal of Applied Research in Finance , Vol. 1, No. 1 (July 2009): pp. 52-63.
Download (117kB) | Preview
One of the most challenging areas relating to the European Monetary Union (EMU) enlargement is the question of new member countries’ vulnerability to exogenous shocks related to euro adoption. Even if well prepared, and also considering the business cycles of the EMU candidate countries became more correlated as the result of persisting convergence toward the old EU member countries, their real output will be still vulnerable to the exogenous structural disturbances. The responsiveness of the new EMU member countries’ real output to the exogenous shocks may of course differ in intensity and durability. If we also assume a possibly low shocks correlation in these countries, the overall short-term wealth effect of the EMU membership may be rather low or even negative at all. In the paper we analyze the impact of three common exogenous structural shocks on the real output development in the new EMU member countries (Cyprus, Malta, the Slovak Republic and Slovenia) in the period 1999-2008 using SVAR (structural vector autoregression) approach. In order to meet this objective we decompose the variability of the real GDP in these countries to permanent and temporary shocks (we assume three types of shocks - nominal (liquidity), demand and supply shocks). Impulse-response functions will be also computed so that we can estimate the behaviour of the real output after structural one standard deviation innovations. The relevant outcomes of the analysis we compare with the results of the tests for the whole euro area (represented here by old EU member countries - EU-12 group). This approach helps us to understand the common as well as differing features of the real output determination in the new EMU member countries and old EU member countries.
|Item Type:||MPRA Paper|
|Original Title:||Shocking aspects of monetary integration (SVAR approach)|
|Keywords:||exogenous shocks, real output, structural vector autoregression, variance decomposition, impulseresponse function|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
|Depositing User:||Rajmund Mirdala|
|Date Deposited:||02. Sep 2009 06:53|
|Last Modified:||12. Mar 2015 18:51|
 Bank for International Settlements: BIS Effective Exchange Rate Indices - http://www.bis.org/statistics/eer/index.htm
 Bayoumi, T., Eichengreen, B., (1992), Shocking Aspects of European Monetary Unification, NBER Working Paper, no. 3949, Cambridge, National Bureau of Economic Research.
 Borghijs, A., Kuijs, L., (2004), Exchange rate in the Central Europe, IMF Working Paper, no. 04/02, Washington, International Monetary Fund.
 Clarida, R., Gali, J., (1994), Sources of Real Exchange Rate Fluctuations: How Important Are Nominal Shocks?, Carnegie-Rochester Conference Series on Public Policy 41, 1994, pp. 1-56.
 Fidrmuc, J., Korhonen, I., (2001), Similarity of supply and demand shocks between the Euro area and the CEECs, BOFIT Discussion Papers 14/2001, Bank of Finland, Institute for Economies in Transition
 Gonda, V., (2006), European Monetary Union in the Context of Global Processes in World Economy, in: Journal of Economics (Ekonomicky casopis), Vol. 54, no. 4 (2006), pp. 352-367.
 Isa, J., Okali, I., (2008), European Monetary Union, Optimum Currency Area and Possible Effects of the Slovakia’s Joining the Euro Area, in: Politicka ekonomie, Vol. 56, no. 3, pp. 318-344.
 Lisý, J., Muchová, E., (2004), Formation and Behaviour of Economic and Monetary Union as an Open Theoretical Issue, in: Journal of Economics (Ekonomicky casopis), Vol. 52, no. 4, pp. 429-448.
 Mirdala, R., (2008), Exchange Rate and Output Vulnerability to Macroeconomic Shocks in Selected CEECs (SVAR approach), in: Journal of Economics (Ekonomicky casopis), Vol. 56, no. 8, pp. 745-763.
 Mundell, R., (1961), A Theory of Optimum Currency Area, in: Americam Economic Review, Vol. 10, no. 2, pp. 657-665.
 OECD - Statistics v4.4 - Frequently Requested Statistics - http://www.oecd.org/document/15/0,3343,en_2649_201185_1873295_1_1_1_1,00.html
 Stavárek, D., (2008), Exchange Market Pressures in the Central European Countries from the Eurozone Membership Perspective, in: South East European Journal of Economics and Business, Vol. 2, no. 3, pp. 7-18.
 Stazka, A., (2006), Sources of Real Exchange Rate Fluctuation in Central and Eastern Europe, CESifo Working Paper, no. 1876, Munich, CESifo GmbH.
 Šikulová, I., (2009), Experience of the Selected Eurozone Member Countries and Posture of the potential member countries to Euro Adoption, Institute of the Economic Research, Slovak Academy of Sciences, Working Paper no. 15.
 Šindel, J., Saroch, S., (2008), The Political Economy of Exchange Rate Policy in Central and Eastern European Countries - Sector Approach, in: Politická ekonomie, Vol. 56, no. 1, pp. 17-39.
 Workie Tiruneh, M. et al. (2008), Development and Perspectives of the World Economy: Turbulences on the Financial Markets and Economic Policy Dilemmas, Institute of the Economic Research, Slovak Academy of Sciences, p. 301