Paul Gaggl, Serguei Kaniovski, Klaus Prettner, Thomas Url
The Short and Long-run Interdependencies Between the Eurozone and the USA
Empirica, 2009, 36(2), S.209-227,
We estimate quarterly cointegrating vector autoregressive models for the Eurozone and the USA based on long-run restrictions derived from a dynamic open economy model. Three long-run relations between the Eurozone and the USA emerge: relative purchasing power parity, international interest parity and a stationary output gap between the two economies. Generalised impulse response functions show differences in the dynamic adjustment of the two economies. Due to the I(1)-characteristic of both output series and the stability conditions imposed by the long-run equilibrium relationships, shocks to the model produce level effects only, while growth rates converge to their long-run averages.
Keywords:Cointegration VAR Steady state Business cycle KP_Prognose_Modelle
Forschungsbereich:Makroökonomie und öffentliche Finanzen