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Asymmetric Growth and Inflation Developments in the Acceding Countries: A New Assessment. NBB Working Paper Nr. 63, November 2004

Ide, Stefaan and Moes, Philippe. (2004) Asymmetric Growth and Inflation Developments in the Acceding Countries: A New Assessment. NBB Working Paper Nr. 63, November 2004. [Working Paper]

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    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.

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    Item Type: Working Paper
    Uncontrolled Keywords: Optimal currency area; Euro-area wide shocks vs. Country-specific shocks; Structural VAR.
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > monetary policy
    Countries > Latvia
    Countries > Estonia
    Countries > Slovakia
    Countries > Lithuania
    Countries > Slovenia
    Countries > Czech Republic
    Countries > Cyprus
    EU policies and themes > Policies & related activities > economic and financial affairs > general
    Countries > Malta
    Countries > Poland
    Countries > Hungary
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > National Bank of Belgium (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 16 Jun 2005
    Page Range: p. 41
    Last Modified: 15 Feb 2011 17:26
    URI: http://aei.pitt.edu/id/eprint/3410

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