The Spillover Effect of Euro Area on Central and Southeastern European Economies: A Global VAR Approach

We use the global vector autoregression model to examine macroeconomic spillovers within the European Union over the period 2000-2014. We investigate how shocks originating in the euro area affect output and prices in the rest of Europe. We examine four different policy relevant shock scenarios: (i)...

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Bibliographic Details
Published in:Open economies review 2016-04, Vol.27 (2), p.359-385
Main Authors: Hajek, Jan, Horvath, Roman
Format: Article
Language:English
Subjects:
Cointegration analysis
Consumer Price Index
Development Economics
Economic activity
Economic growth
Economic impact
Economic models
Economic Policy
Economics
Economics and Finance
Europe
European Integration
Eurozone
GDP
Gross Domestic Product
Industrial production
Inflation
Interest rates
International Economics
Investigations
Macroeconomics
Macroeconomics/Monetary Economics//Financial Economics
Monetary policy
Regression analysis
Research Article
Spillover effect
Statistical analysis
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Summary:We use the global vector autoregression model to examine macroeconomic spillovers within the European Union over the period 2000-2014. We investigate how shocks originating in the euro area affect output and prices in the rest of Europe. We examine four different policy relevant shock scenarios: (i) increase in the euro area interest rate; (ii) increase in the euro area industrial production; (iii) decrease in the euro area consumer prices and (iv) decrease in global oil prices. In general, we find that these shocks have an effect of same (and expected) sign but of different size across the European Union. Our results suggest that the response of Central European countries to the euro area shocks is almost as strong as the response of the euro area countries itself. On the other hand, our results indicate that South East Europe is somewhat less sensitive to the euro area shocks and oil price shocks.
ISSN:0923-7992
1573-708X
DOI:10.1007/s11079-015-9378-4