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The Impact of the Euro on International Stability and Volatility

Author

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  • Stefan Gerlach
  • Mathias Hoffmann

Abstract

We investigate the impact of EMU on macroeconomic volatility. The volatilities of inflation and nominal interest rates have declined, as has, more importantly, the volatility of real consumption growth. Since global volatility has fallen for reasons unrelated to EMU (the “great moderation†), we focus on the volatilities of bilateral differences in growth rates (or changes). Pairs of EMU countries have experienced the greatest fall in consumption volatility, followed by pairs in which one country is an EMU member. We demonstrate that these findings are closely linked to changes in consumption risk sharing. Overall, EMU has made a difference.

Suggested Citation

  • Stefan Gerlach & Mathias Hoffmann, 2008. "The Impact of the Euro on International Stability and Volatility," European Economy - Economic Papers 2008 - 2015 309, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0309
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    References listed on IDEAS

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    1. repec:onb:oenbwp:y::i:162:b:1 is not listed on IDEAS
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    3. Agustin S. Benetrix, 2015. "International Risk Sharing and the Irish Economy," The Economic and Social Review, Economic and Social Studies, vol. 46(1), pages 29-49.
    4. Claudia M. Buch, 2013. "From the Stability Pact to ESM - What Next?," Chapters, in: Andreas Dombret & Otto Lucius (ed.), Stability of the Financial System, chapter 5, Edward Elgar Publishing.

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    More about this item

    Keywords

    Gerlach; Hoffmann; EMU; macroeconomic volatility; euro;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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