Reassessment of the Optimal Currency Area theory in the persistently heterogeneous European Union

Euro4Europe

A Research Project by Vilnius University Faculty of Economics and Business Administration

Despite the sizeable literature on BCA in the EU, so far only very few contributions have attempted to make causal inferences on the effects of the European integration on BCS in the countries affected by this integration process. Project aims to explore the impact of European integration on business cycle asymmetries (BCA) and provide empirical evidence on the long standing dispute among proponents of endogenous optimal currency area (OCA) theories, on whether integration increases BCA (as argued by Frankel and Rose, 1998) or decreases it (Krugman, 1993). Project will reassess the evolution of BCS in Europe in a unified framework and analyse it at different levels of territorial disaggregation.

MAIN RESEARCH AREAS

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National Business Cycle Synchronization

A univariate and multivariate analyses at the country level will be conducted using alternative identification strategies in time-frequency domain. The directions of causal relationships will be identified by phase shift.

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Economic Integration and Transmission of Macroeconomics Shocks

We will focus ontransmission mechanismsand the international business cycles (BC). Wewill make use and expanda global vector autoregressive (GVAR) model, developed by Pesaran et al. (2004), in order toassess the transmission of demand,supply and other macroeconomic shocks across European countries.  The comparison of shock spilloversacross countries within the euro area and in other world regions will also provide evidence on the effects of integration on BC(a)symmetries.

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The Impact of Economic Integration on Regional Business Cycle Syncronization

We will analyse the effect of several integration events on BCS at the regional (NUTS2 and NUTS3) level which will allow to identify the causal effects of joining EMU on BC synchronisation using various identification strategies. It will also allow for an assessment of potentially heterogeneous and non-linear treatment effects.

THE TEAM

DR. SVATOPLUK KAPOUNEK
DR. DMITRIJ CELOV
SAULIUS JOKUBAITIS
Ph.D. POVILAS LASTAUSKAS
Ph.D. LAIMUTĖ URBŠIENĖ
KAROLIS BIELSKIS
Ph.D. RIMA RUBČINSKAITĖ
Ph.D. ANH DINH MINH NGUYEN
DR. GINDRUTĖ KASNAUSKIENĖ
DR. JARKO FIDRMUC
Ph.D. MARIAROSARIA COMUNALE
ROSITA KARIETAITĖ
DR. PETER HUBER
Ph.D. GRETA JUODŽIUKYNIENĖ
LAURA GUDAUSKAITĖ
DR. JESUS CRESPO CUARESMA
ŽYMANTAS BARANAUSKAS

WORKSHOPS

1st WORKSHOP "ECONOMIC POLICY AND EUROPEAN INTEGRATION AT THE NATIONAL LEVEL"

19th December 2019, Vilnius University, Faculty of Economics and Business Administration

Regional Business Cycle Synchronization in the Long Run: Evidence from Austria

Dr. Svatopluk Kapounek, Principal Investigator “Euro4Europe” (Mendel University in Brno, Czech Republic)

Dr. Peter Huber, senior researcher (WIFO, Austria)

Business Cycle Synchronization in a Currency Union: Why Nobody Loves the Euro?

Dr. Jarko Fidrmuc, senior researcher (Zeppelin University of Friedrichshafen,  Germany)

Measuring fiscal stress index in EU

Dr. Dmitrij Celov, researcher (Vilnius University)

Rosita Karietaitė, master student (Vilnius University)

Theoretical Application of Varieties of Capitalism to the Business Cycle Synchronization Field

Žymantas Baranauskas, PhD student (Vilnius University)

Household Finance and Real Economy Fluctuations: Credit-Driven Household Demand Channel Effects During the Recent Financial Crisis

Karolis Bielskis, PhD student (Vilnius University)

Sectoral-Regional Business Cycle Synchronization in EU

Ph.D. Mariarosaria Comunale, junior researcher (Vilnius University)

Dr. Dmitryj Celov, researcher (Vilnius University)

The Cointegration of Baltic States with Main Trading Partners

Ph.D. Laima Urbšienė, senior researcher (Vilnius University)

Ph.D. Rima Rubčinskaitė, junior researcher (Vilnius University)

Application of Sparce PCA, Cluster, SSA, Wavelets Analysis to the GVA Data Analyzed in Sectoral-Regional EU Context

Saulius Jokubaitis, doctoral student, (Vilnius University)

Dr. Dmitryj Celov, researcher (Vilnius University)

 

2nd WORKSHOP

17th April 2020

Effects of Labour Market Institutions on Business Cycle Fluctuations

Žymantas Baranauskas, Ph.D. student (Vilnius University)

Passing European Financial Shocks through GVAR

Dr. Dmitryj Celov, researcher (Vilnius University)

Laura Gudauskaitė, junior researcher (Vilnius University)

Shocks, Housing Sentiments and Real Economy

Karolis Bielskis, Ph.D. student (Vilnius University)

Assessing the Trade Integration and Business Cycle Synchronization: a Reappraisal with Focus on Central and Eastern Europe

Ph.D. Greta Juodžiukynienė, junior researcher (Vilnius University)

PUBLICATIONS

Crespo Cuaresma, J., Doppelhofer, G., Feldkircher, M., Huber, F. (2019). "Spillovers from US monetary policy: evidence from a time varying parameter global vector auto‐regressive model". Journal of the Royal Statistical Society: Series A., vol. 182, part 3, 831–861. Paper was nominated and won Vladas Jurgutis Award (2020) for significant research works by the Bank of Lithuania.

Crespo Cuaresma, J., Huber, F., Onorante, L. (2020). "Fragility and the effect of international uncertainty shocks". Journal of International Money and Finance. https://doi.org/10.1016/j.jimonfin.2020.102151, https://www.sciencedirect.com/science/article/pii/S0261560620300838

Fidrmuc, J., Campos, N. F., Korhonen, I. (2019). "A Meta-Analysis of the Effects of Currency Unions on Business Cycle Synchronisation". International Review of Financial Analysis – OCA, vol. 61, 274-283.

Fidrmuc, J.,  Danišková, K. (2019). "Meta-Analysis of the New Keynesian Phillips Curve in Developed and Emerging Economies". Emerging Markets Finance and Trade. doi.org/10.1080/1540496X.2019.1590700  https://doi.org/10.1080/1540496X.2019.1590700

Grigaliuniene, Z., Celov, D., Hartwell, Ch. A. (2020). "The More the Merrier? The Reaction of Euro Area Stock Markets to New Members". Journal of International Financial Markets, Institutions and Money. https://doi.org/10.1016/j.intfin.2020.101195

Huber, P. (2018). "The role of migration as adjustment mechanism in the crisis and EMU".  Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, vol. 66(6), 1497-1508. https://doi.org/10.11118/actaun201866061497

Kapounek, S., Kučerová, H. (2019). "Historical Decoupling in the EU: Evidence from Time-Frequency Analysis", International Review of Economics and Finance, vol. 60(C), 265-280. https://doi.org/10.1016/j.iref.2018.10.018

DATA

Population and Unemployment

Time Coverage: 1989-2017
Country Coverage: 26 Countries
Frequency: Monthly

 

Trade Openness

Time Coverage: 1960-2016
Country Coverage: 29 Countries
Frequency: Yearly

 

CONTACT

Phone

(+370 5) 236 61 26

Address

Saulėtekio ave 9, II building, Vilnius, Lithuania

E-mail

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