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Federal Reserve Bank of Atlanta
FRB Atlanta Working Paper
European Monetary Union: evidence from structural VARs
Joseph A. Whitt

This paper examines the historical pattern of aggregate demand and supply shocks in several European Monetary System countries in order to assess the desirability of monetary union. Countries with similar patterns of shocks are presumably better candidates for monetary union than those hit by wildly disparate shocks. The historical time series of shocks is identified by estimating a vector autoregressive model while imposing the restriction that demand shocks have no permanent effect on real output. In most cases supply shocks are positively correlated with those of Germany, but the negative correlation of demand shocks suggests that monetary union may not be desirable.

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Joseph A. Whitt, European Monetary Union: evidence from structural VARs, Federal Reserve Bank of Atlanta, FRB Atlanta Working Paper 95-1, 1995.
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Keywords: Monetary unions - European Union countries
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