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Financial stress and asymmetric shocks transmission within the Eurozone. How fragile is the common monetary policy?

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  • Apostolakis, Georgios N.
  • Giannellis, Nikolaos
  • Papadopoulos, Athanasios P.

Abstract

This study focuses on the financial linkages within the Eurozone as well as on the exposure of Eurozone countries to internal and external shocks. We have found evidence of strong financial interdependence among the Eurozone countries, but there is evidence of stronger interdependence among the countries of the same cluster. That is, the major spillover transmitter for South countries is Italy, while North countries are mostly affected by the Netherlands. No matter the type of the shock (i.e. internal or external), the results imply that shocks are not symmetrically distributed within the Eurozone. South countries receive more stress from internal shocks (i.e. debt crisis), while North countries are more exposed to external shocks, such as a potential financial shock in US. The evidence of asymmetric transmission of financial shocks across the Eurozone countries reveals a complex and fragile monetary policy framework.

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  • Apostolakis, Georgios N. & Giannellis, Nikolaos & Papadopoulos, Athanasios P., 2019. "Financial stress and asymmetric shocks transmission within the Eurozone. How fragile is the common monetary policy?," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940819302190
    DOI: 10.1016/j.najef.2019.101006
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    More about this item

    Keywords

    Financial stress spillovers; Asymmetric transmission; Eurozone; Monetary policy;
    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
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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