Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/37040
Authors: 
Enders, Zeno
Jung, Philip
Müller, Gernot J.
Year of Publication: 
2009
Series/Report no.: 
Bonn Econ Discussion Papers 6/2009
Abstract: 
In this paper we analyze European business cycles before and under EMU. Across the two periods we ?nd 1) a signi?cant decline in real exchange rate volatility, 2) signi?cant changes in cross-country correlations, and 3) the volatility of macroeconomic fundamentals largely un- changed. 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 ?nd 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
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