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The transmission of business cycles: Lessons from the 2004 enlargement of the EU and the adoption of the euro
Author(s) -
Nguyen Hoang Sang,
Rondeau Fabien
Publication year - 2019
Publication title -
economics of transition and institutional change
Language(s) - English
Resource type - Journals
eISSN - 2577-6983
pISSN - 2577-6975
DOI - 10.1111/ecot.12212
Subject(s) - spillover effect , economics , resizing , international economics , interdependence , business cycle , european union , bilateral trade , macroeconomics , geography , political science , law , archaeology , china
This paper evaluates the macroeconomic interdependencies of seven Central and Eastern European Countries ( CEEC s) with the Euro Area ( EA ) through trade relationship. We estimate a near‐ VAR model and simulate the responses of activity in those CEEC s to output shocks for 12 former members of the EA before and after the 2004 enlargement of the European Union. During both periods, empirical results show that spillover effects come through the main economies of the EA : Germany, France and Italy. Furthermore, CEEC s were more responsive to output shocks in the EA after 2004 than before (3.3 times more on average). Increases in spillover effects are larger for the three CEEC s that adopted the Euro early (Slovenia, Slovakia and Estonia) than the other CEEC s but without higher trade intensity with the EA . Our results show that trade effects are positive inside the same currency area but negative for the CEEC s without the euro.