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Common Macroeconomic Shocks and Business Cycle Fluctuations in Euro Area Countries

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  • Antonella Cavallo
  • Antonio Ribba

Abstract

This paper investigates the dynamic effects of common macroeconomic shocks in shaping business cycle fluctuations in a group of Euro-area countries. In particular, by using the structural (near)VAR methodology, we investigate the effect of area-wide shocks, with particular attention to monetary policy shocks. The main conclusion is that: (a) contractionary monetary policy shocks cause similar recessionary effects in all countries; (b) as far as business cycle fluctuations are concerned, there is a separation into two distinct groups of countries, with a first group including the biggest European economies in which business cycle fluctuations are mainly explained by common, area-wide shocks and a second one, including Greece, Ireland and Portugal, in which the national shocks play, instead, a much greater role

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  • Antonella Cavallo & Antonio Ribba, 2014. "Common Macroeconomic Shocks and Business Cycle Fluctuations in Euro Area Countries," Center for Economic Research (RECent) 104, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    • Handle: RePEc:mod:recent:104
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    Cited by:

    1. Antonella Cavallo & Antonio Ribba, 2017. "Measuring the Effects of Oil Price and Euro-area Shocks on CEECs Business Cycles," Department of Economics 0111, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    2. Dallal Bendjellal, 2022. "Sovereign Risk, Financial Fragility and Debt Maturity," Working Papers hal-03792522, HAL.
    3. Marinko Škare & Saša Stjepanović, 2016. "Measuring Business Cycles: A Review," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 10(1), March.
    4. Dominguez-Torres, Helena & Hierro, Luis Ángel, 2020. "Are there monetary clusters in the Eurozone? The impact of ECB policy," Journal of Policy Modeling, Elsevier, vol. 42(1), pages 56-76.
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    6. Martin Mandler & Michael Scharnagl & Ute Volz, 2022. "Heterogeneity in Euro Area Monetary Policy Transmission: Results from a Large Multicountry BVAR Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(2-3), pages 627-649, March.
    7. repec:cnb:ocpubv:as17 is not listed on IDEAS
    8. Cavallo, Antonella & Ribba, Antonio, 2018. "Measuring the effects of oil price and Euro-area shocks on CEECs business cycles," Journal of Policy Modeling, Elsevier, vol. 40(1), pages 74-96.
    9. Jesús Ferreiro & Catalina Gálvez & Carmen Gómez & Ana González, 2017. "Economic Crisis and Convergence in the Eurozone Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 64(2), pages 223-244, March.
    10. Dallari, Pietro & Ribba, Antonio, 2020. "The dynamic effects of monetary policy and government spending shocks on unemployment in the peripheral Euro area countries," Economic Modelling, Elsevier, vol. 85(C), pages 218-232.
    11. Dallal Bendjellal, 2022. "Sovereign Risk, Financial Fragility and Debt Maturity," AMSE Working Papers 2222, Aix-Marseille School of Economics, France.
    12. Raphael Raduzzi & Antonio Ribba, 2020. "The macroeconomics outcome of oil shocks in the small Eurozone economies," The World Economy, Wiley Blackwell, vol. 43(1), pages 191-211, January.
    13. Tania Karamisheva, 2021. "Measuring the Business Cycle in Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 17-38.
    14. Pietro Dallari & Antonio Ribba, 2015. "Economic Shocks and their Effects on Unemployment in the Euro Area Periphery under the EMU," Center for Economic Research (RECent) 114, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    15. repec:cnb:ocpubv:as16 is not listed on IDEAS
    16. Yildirim, Zekeriya, 2022. "Global financial risk, the risk-taking channel, and monetary policy in emerging markets," Economic Modelling, Elsevier, vol. 116(C).
    17. Pietro Dallari & Antonio Ribba, 2015. "Economic Shocks and their Effects on Unemployment in the Euro Area Periphery under the EMU," Department of Economics (DEMB) 0057, University of Modena and Reggio Emilia, Department of Economics "Marco Biagi".
    18. Dutra, Tiago Mota & Dias, José Carlos & Teixeira, João C.A., 2022. "Measuring financial cycles: Empirical evidence for Germany, United Kingdom and United States of America," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 599-630.
    19. Pietro Dallari & Antonio Ribba, 2019. "The Dynamic Effects of Monetary Policy and Government Spending Shocks on Unemployment in the Peripheral Euro Area Countries," Department of Economics 0143, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    20. Theron Shumba & Sophia Mukorera, 2023. "Monetary Policy Implications on Macroeconomic Performance in the Common Monetary Area: A Panel-SVAR Framework," Economies, MDPI, vol. 11(5), pages 1-18, May.
    21. Ute Volz & Martin Mandler & Michael Scharnagl, 2016. "Heterogeneity in Euro Area Monetary Policy Transmission: Results from a large Multi-Country BVAR," EcoMod2016 9609, EcoMod.
    22. Benecká, Soňa & Fadejeva, Ludmila & Feldkircher, Martin, 2020. "The impact of euro Area monetary policy on Central and Eastern Europe," Journal of Policy Modeling, Elsevier, vol. 42(6), pages 1310-1333.

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    More about this item

    Keywords

    Business Cycle Fluctuations; Euro area; Common Shocks; Near-Structural VARs.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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

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