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Title:Has the euro changed the business cycle? PDF Logo
Authors:Enders, Zeno
Jung, Philip
Müller, Gernot J.
Issue Date:2009
Series/Report no.:Bonn econ discussion papers 2009,6
Abstract:In this paper we analyze European business cycles before and under EMU. Across the two periods we find 1) a significant decline in real exchange rate volatility, 2) significant changes in cross-country correlations, and 3) the volatility of macroeconomic fundamentals largely unchanged. We develop a two-country business cycle model and show that the calibrated model is able to replicate key features of the data prior to and under EMU. We find that the euro has a strong bearing on the transmission mechanism as cross-country spillovers increase substantially under EMU. As a result, foreign shocks become more and domestic shocks less important in accounting for the (unchanged) volatility of macroeconomic fundamentals.
Subjects:European business cycles
Euro
Optimum Currency Area
EMU
Monetary Policy
Exchange rate regime
Cross-country spillovers
JEL:F41
F42
E32
Document Type:Working Paper
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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