How interdependent are Eastern European economies and the Euro area?

Catherine Keppel and Klaus Prettner

The Quarterly Review of Economics and Finance, 2015, vol. 58, issue C, 18-31

Abstract: This article investigates the interrelations between the Euro area and five Central and Eastern European economies. Using an open economy framework, we derive theoretical restrictions to be imposed on the cointegration space of a structural vector error correction model. We employ generalized impulse response analysis to assess the effects of shocks to output, interest rates, the exchange rate, and relative prices on both areas. The results show strong inter-regional spillovers of output shocks with the magnitude being similarly strong in both areas. Furthermore, we find multiplier effects in Central and Eastern Europe and some evidence for the European Central Bank's desire for price stability.

Keywords: European economic integration; Structural vector error correction model; Generalized impulse response analysis; Inter-regional transmission of shocks (search for similar items in EconPapers)
JEL-codes: C32 C51 F41 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (11)

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Working Paper: How interdependent are Eastern European economies and the Euro area? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:58:y:2015:i:c:p:18-31

DOI: 10.1016/j.qref.2015.02.012

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