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Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn >
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http://hdl.handle.net/10419/37040
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| Title: | | Has the euro changed the business cycle?  |
| 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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