Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73810
Authors: 
Lehwald, Sybille
Year of Publication: 
2012
Series/Report no.: 
Ifo Working Paper 122
Abstract: 
Using a Bayesian dynamic factor model, I examine the comovement of output, investmentand consumption growth among Euro area countries before and after the introduction of theEuro. For that purpose, I compare a pre-Euro period (1991–1998) to a Euro period(2000–2010) and identify a common Euro factor for each period separately. I find thatthe comovement of main macroeconomic variables and the common factor increases forcore Eurozone countries from the first to the second period, while it decreases for mostperipheral economies. This can be interpreted as a rise in business cycle synchronizationfor the core and a respective decline for the periphery.Different to the implications made by the endogeneity argument of currency areas(Frankel and Rose, 1998), my evidence suggest that the introduction of the Euro hasfostered imbalances between core and peripheral Eurozone countries.
Subjects: 
European business cycles
Euro
optimum currency area
core and periphery
dynamic factor analysis
JEL: 
C11
C32
E32
F41
F42
Document Type: 
Working Paper

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