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Revisiting the core-periphery view of EMU

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  • Pentecôte, Jean-Sébastien
  • Huchet-Bourdon, Marilyne

Abstract

This study extends Bayoumi and Eichengreen's (1993) empirical methodology in order to give a reappraisal of the core-periphery view of the enlarged euro area. We show how to derive two useful indices from the “correlation box” formed by aggregate demand and supply shocks. One measures the Euclidean distance to the core, while the other reveals whether shock asymmetry comes mostly from the production or the demand side. Using data over 1996–2008 on 21 countries and iterative VAR estimates, we find evidence of a gradual move to the symmetric core while new EMU Member States still remain at the very periphery.

Suggested Citation

  • Pentecôte, Jean-Sébastien & Huchet-Bourdon, Marilyne, 2012. "Revisiting the core-periphery view of EMU," Economic Modelling, Elsevier, vol. 29(6), pages 2382-2391.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:6:p:2382-2391
    DOI: 10.1016/j.econmod.2012.06.036
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    References listed on IDEAS

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    Cited by:

    1. Chortareas, Georgios & Mavrodimitrakis, Christos, 2016. "Can monetary policy fully stabilize pure demand shocks in a monetary union with a fiscal leader?," Economic Modelling, Elsevier, vol. 54(C), pages 463-468.
    2. Ahlborn, Markus & Wortmann, Marcus, 2018. "The core‒periphery pattern of European business cycles: A fuzzy clustering approach," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 12-27.
    3. Binet, Marie-Estelle & Pentecôte, Jean-Sébastien, 2015. "Macroeconomic idiosyncrasies and European monetary unification: A sceptical long run view," Economic Modelling, Elsevier, vol. 51(C), pages 412-423.
    4. Rathke, Alexander & Streicher, Sina & Sturm, Jan-Egbert, 2022. "How similar are country- and sector-responses to common shocks within the euro area?," Journal of International Money and Finance, Elsevier, vol. 120(C).
    5. Peter Dreuw, 2023. "Structural time series models and synthetic controls—assessing the impact of the euro adoption," Empirical Economics, Springer, vol. 64(2), pages 681-725, February.
    6. Christos Mavrodimitrakis, 2022. "The Policy Mix in a Monetary Union: Who Bears the Burden of Asymmetric Shocks' Stabilisation?," Economics Discussion Papers em-dp2022-12, Department of Economics, University of Reading.

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    More about this item

    Keywords

    Monetary union; Euro area; Shock asymmetry; Euclidean distance;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • D6 - Microeconomics - - Welfare Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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