EBSLG

 

 
European Business Schools Librarian's Group
Home About Series Subject/JEL codes Advanced Search
Department of Economics, WU (Wirtschaftsuniversität Wien) Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)

No 138:
After Two Decades of Integration: How Interdependent are Eastern European Economies and the Euro Area?

Catherine Prettner () and Klaus Prettner ()

Abstract: This article investigates the interrelations between the initial members of the Euro area and five important Central and Eastern European economies. We set up a theoretical open economy model to derive the Purchasing Power Parity, the Interest Rate Parity, the Fisher Inflation Parity, and an output gap relation. After taking convergence into account, they are used as restrictions on the cointegration space of a structural vector error correction model. We then employ generalized impulse response analysis to assess the dynamic effects of shocks in output and interest rates on the respective other area as well as the implications of shocks in the exchange rate and in relative prices on both areas. The results show a high degree of interconnectedness between the two economies. There are strong positive spillovers in output to the respective other region with the magnitude of the impact being similarly strong in both areas. Furthermore, we find a multiplier effect being present in Eastern Europe and some evidence for the European Central Banks’ desire towards price stability.

Keywords: European Economic Integration, Structural Vector Error Correction Model, Generalized Impulse Response Analysis; (follow links to similar papers)

JEL-Codes: C11,; C32,; F41; (follow links to similar papers)

March 2012

PDF Document

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Downloadable files:

wp138.pdf    PDF-file
Download Statistics


Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design Joakim Ekebom

Handle: RePEc:wiw:wiwwuw:wuwp138 This page was generated on 2017-09-12 21:40:54