Domestic versus International Determinants of European Business Cycles: A GVAR Approach

24 Pages Posted: 21 May 2013

See all articles by Melisso Boschi

Melisso Boschi

Centre for Applied Macroeconomic Analysis (CAMA)

Massimiliano Marzo

Department of Management, University of Bologna

Simone Salotti

Oxford Brookes University

Multiple version iconThere are 2 versions of this paper

Date Written: May 2013

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.

Keywords: Business cycle, inflation, European Monetary Union, Global VAR (GVAR)

JEL Classification: C32, E32

Suggested Citation

Boschi, Melisso and Marzo, Massimiliano and Salotti, Simone, Domestic versus International Determinants of European Business Cycles: A GVAR Approach (May 2013). Available at SSRN: https://ssrn.com/abstract=2267614 or http://dx.doi.org/10.2139/ssrn.2267614

Melisso Boschi (Contact Author)

Centre for Applied Macroeconomic Analysis (CAMA) ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

Massimiliano Marzo

Department of Management, University of Bologna ( email )

34, Via Capo di Lucca
Bologna, Bologna 40126
Italy
0512098091 (Phone)

Simone Salotti

Oxford Brookes University ( email )

United Kingdom

HOME PAGE: http://simonesalotti.wordpress.com

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