Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/144277 
Year of Publication: 
2004
Series/Report no.: 
NBB Working Paper No. 63
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
In this paper, we use a SVAR model in order to study the asymmetry of growth and inflation developments in the acceding countries vis-à-vis the euro area over the years 1995-2003. The model combines two strands of the literature, the explanation in terms of country-specific and euro area shocks, and a further split between supply and demand shocks. The four structural shocks may all create asymmetries vis-à-vis the euro area. It appears that country-specific shocks are the main source of growth or inflation divergence, rather than the distinct way in which acceding countries react to euro area shocks. But whereas country-specific supply shocks are mainly responsible for growth divergence, country-specific demand shocks are mainly responsible for inflation asymmetry. Hence, a low asymmetry in terms of growth does not necessarily imply a low asymmetry in terms of inflation, although the latter is particularly important for countries aiming to join the euro area. There is some evidence that both asymmetries were on the fall over the last years of the sample.
Subjects: 
optimal currency area
euro-area wide shocks vs. country-specific shocks
structural VAR.
JEL: 
E3
F42
F15
C32
Document Type: 
Working Paper

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