A global macro model for emerging Europe

Abstract

The Working Paper series of the Oesterreichische Nationalbank is designed to disseminate and to provide a platform for Working Paper series of the Oesterreichische Nationalbank is designed to disseminate and to provide a platform for Working Paper series of the Oesterreichische Nationalbank discussion of either work of the staff of the OeNB economists or outside contributors on topics which are of special interest to the OeNB. To ensure the high quality of their content, the contributions are subjected to an international refereeing process. The opinions are strictly those of the authors and do in no way commit the OeNB.

How interdependent are Eastern European economies and the Euro area?

“…An interesting result is that the shock to the interest rate has a small dampening effect on Euro area output setting in after three quarters and getting stronger and significant over time with the response of CEE-5 GDP following a similar pattern. Our result of the point estimate is qualitatively and quantitatively in line with the effects reported by Feldkircher (2013). In the long run and for both areas, the responses of output turn insignificant confirming neutrality of monetary policy.…”

“…The shock in Euro area GDP not only has an impact on domestic output but also results in an immediate increase in CEE-5 output by 0.4 percent, yet the dynamics are reinforced in the subsequent quarters. The order of magnitude of this response is in line with the findings of the IMF (2012), Backé et al (2013), andFeldkircher (2013). 7 Altogether the positive spillovers to Eastern Europe stay significant for approximately two and a half years.…”

“…To the best of our knowledge, there exists no paper that applies a similar modeling strategy like Garratt et al (2006) to the CEE region. We aim to fill this gap and thereby complement the work of Backé et al (2013) andFeldkircher (2013) to enhance our knowledge on the transmission of shocks between the Euro area and the CEE countries.…”

“…They use a structural VAR model and show that a fiscal expansion in Germany triggers expansionary fiscal policy measures in all five CEE countries. Most recently, Backé et al (2013) and Feldkircher (2013) have contributed substantially toward the understanding of the spillover effects of output and interest rate shocks to the CEE countries by employing a global VAR (GVAR) model. They find evidence for positive output spillover effects and negative interest rate effects from Western Europe to the CEE countries.…”

International spillovers of (un)conventional monetary policy: The effect of the ECB and the US Fed on non-euro EU countries

“…In contrast with the present article, Hajek and Horvath (2016) do not examine the effects of unconventional monetary policy, nor do they consider the effects of the US Fed's monetary policy. Similarly, an important contribution by Feldkircher (2015) does not examine unconventional monetary policy. Another stream of literature examines the effects of the ECB's unconventional monetary policy on the euro area's output and prices but not on international spillovers (Gambacorta et al, 2014;Peersman, 2011).…”