Working Paper: CEPR ID: DP4652
Authors: Michael J. Artis; Denise Osborn; Pedro J. Perez
Abstract: This Paper examines the changing relationships between the G7 countries through VAR models for the quarterly growth rates, estimated both over sub-periods and using a rolling data window. Six trivariate models are estimated, all of which include the US and a European (E15) aggregate. In relative terms, the conditional volatility of E15 growth has declined more since 1980 than the well-documented decline for the US. The propagation of shocks has also changed, with the volatility and propagation effects separated by applying shocks of pre-1980 magnitude to VARs estimated over various periods. Rolling estimation reveals that E15 has a steadily increasing impact on the US economy over time, while the effects of the US on Europe have been largest during the 1970s and the late 1990s.
Keywords: European integration; international business cycles; time variation; volatility
JEL Codes: E32; F02; F43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| conditional volatility of E15 growth (F29) | decline since 1980 (N12) |
| shocks of pre-1980 magnitude (E65) | propagation of shocks has changed (E32) |
| E15 (I25) | US economy (O51) |
| US (L87) | Europe (N93) |
| external shocks (F69) | US (L87) |