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Modelling large open economies with international linkages: the USA and Euro area


Dungey, M and Osborn, DR, Modelling large open economies with international linkages: the USA and Euro area, Journal of Applied Econometrics, 29, (3) pp. 377-393. ISSN 1099-1255 (2014) [Refereed Article]

Copyright Statement

Copyright 2013 John Wiley & Sons, Ltd.

DOI: doi:10.1002/jae.2323


Empirical modelling of the linkages between the euro area and the USA requires an open economy framework. The methodology proposed in this paper achieves identification of a structural vector error correction model by supplementing restrictions from economic theory with assumptions for the direction of causality in cross-country contemporaneous relationships. Our baseline model assumes contemporaneous causality runs from the USA to the euro area for both output and inflation, with monetary policy domestically focused. The role of the USA as leading the euro area business cycle is reinforced by our results, but strong bidirectional cross-country interactions are uncovered for inflation and interest rates

Item Details

Item Type:Refereed Article
Research Division:Economics
Research Group:Applied economics
Research Field:Macroeconomics (incl. monetary and fiscal theory)
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Monetary policy
UTAS Author:Dungey, M (Professor Mardi Dungey)
ID Code:90258
Year Published:2014 (online first 2013)
Web of Science® Times Cited:9
Deposited By:TSBE
Deposited On:2014-03-31
Last Modified:2014-12-20

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