Comovements and heterogeneity in the euro area analyzed in a non-stationary dynamic factor model
Article first published online: 3 APR 2009
Copyright © 2009 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 24, Issue 6, pages 933–959, September/October 2009
How to Cite
Eickmeier, S. (2009), Comovements and heterogeneity in the euro area analyzed in a non-stationary dynamic factor model. J. Appl. Econ., 24: 933–959. doi: 10.1002/jae.1068
- Issue published online: 23 SEP 2009
- Article first published online: 3 APR 2009
This paper establishes stylized facts on comovements and heterogeneity of individual euro area countries' output and price developments in the past two decades. For this purpose, a non-stationary structural dynamic factor model is fitted to a large dataset of euro area macroeconomic variables. The main results are as follows. Both common factors and idiosyncratic components are important in explaining individual countries' output and price developments in the euro area and are also both very persistent. Idiosyncratic shocks and adjustments to these shocks are mainly responsible for cross-country heterogeneity. The asymmetric transmission of common shocks plays a minor role. Finally, there is no strong evidence that some common shocks lead to greater heterogeneity than others. Copyright © 2009 John Wiley & Sons, Ltd.