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Domestic Versus International Determinants Of European Business Cycles: A GVAR Approach

Author

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  • Melisso Boschi
  • Massimiliano Marzo
  • Simone Salotti
Abstract
We investigate the sources of macroeconomic (output and inflation) variability in selected European countries within and outside the European Monetary Union: Germany, Italy, Austria, the UK and Poland. Using quarterly data from 1985:1 to 2005:4, we estimate a Global Vector Autoregressive (GVAR) model that includes fifteen countries and regions, covering more than 90 per cent of the World GDP. We find that domestic factors explain most of the macroeconomic variability over the short horizon, i.e. from zero to four quarters, but become progressively dominated by international ones at larger horizons. Regional factors appear to be particularly important. As for output, we detect no significant differences between countries currently members of the European Monetary Union and non-members. As for inflation, on the contrary, regional factors are more influential than those of the rest of the world for the EMU member countries, differently from non-members..

Suggested Citation

  • Melisso Boschi & Massimiliano Marzo & Simone Salotti, 2013. "Domestic Versus International Determinants Of European Business Cycles: A GVAR Approach," CAMA Working Papers 2013-28, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2013-28
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    More about this item

    Keywords

    Business cycle; inflation; European Monetary Union; Global VAR (GVAR);
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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