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Output Volatility and Its Transmission in Transition Economies: Implications for European Integration

Author

Listed:
  • Hegerty, Scott W.

    (Northeastern Illinois University)

Abstract

Following the 2008 financial crisis, the world’s attention was drawn to the periphery of the European Union, where economic openness and pegs to the Euro combined to destabilize the region. This study measures the output volatility of a set of Central and Eastern European countries from the early 1990s to 2011 using Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and GARCH-in-Mean models. Volatility “spillovers” are then tested with Vector Autoregressive and Multivariate GARCH techniques. Overall, six countries can be modeled as a GARCH process, and for three of these, volatility significantly reduces output growth. Volatility comovements are particularly strong among the Visegrad countries, while Romania seems fairly insulated from external shocks. This asymmetry of responses to other CEE countries and to foreign shocks suggests that expanding the Eurozone may lead to adjustment problems.

Suggested Citation

  • Hegerty, Scott W., 2012. "Output Volatility and Its Transmission in Transition Economies: Implications for European Integration," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 27, pages 520-536.
    • Handle: RePEc:ris:integr:0584
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    Cited by:

    1. repec:zbw:bofitp:2013_013 is not listed on IDEAS
    2. Scott W. Hegerty, 2015. "Interest-Rate Volatility in the Baltics: Issues of Measurement and International Contagion," Eastern European Business and Economics Journal, Eastern European Business and Economics Studies Centre, vol. 1(1), pages 12-27.
    3. Markus Eller & Jarko Fidrmuc & Zuzana Fungáčová, 2016. "Fiscal Policy and Regional Output Volatility: Evidence from Russia," Regional Studies, Taylor & Francis Journals, vol. 50(11), pages 1849-1862, November.
    4. Markus Eller & Jarko Fidrmuc & Zuzana Fungáčová, 2016. "Fiscal Policy and Regional Output Volatility: Evidence from Russia," Regional Studies, Taylor & Francis Journals, vol. 50(11), pages 1849-1862, November.

    More about this item

    Keywords

    Volatility; Output; Transition Economies; Vector Autoregression; GARCH;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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