Macroeconomic Asymmetry in the European Union: The Difference between New and Old Members

27 Pages Posted: 5 May 2005

See all articles by Yuliya Demyanyk

Yuliya Demyanyk

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Vadym Volosovych

Erasmus University Rotterdam (EUR)

Date Written: January 2005

Abstract

We study the degree of output and consumption asymmetry for the ten new and fifteen original European Union members during the period 1994-2001. We establish basic stylized facts about macroeconomic asymmetry from correlations of GDP and consumption growth rates with corresponding aggregates. In addition, we determine which countries would potentially gain the most from international risk sharing within the European Union employing a utility-based measure suggested by Kalemli-Ozcan, Sorensen and Yosha (2001). We find much higher potential gains for the new members compared to those for original EU-15 countries. In particular, economies with the most volatile and counter-cyclical output growth - Czech Republic, Slovak Republic, and the three Baltic states - might benefit the most. We show that EU enlargement would not reduce the welfare of EU-15 members. If these countries move towards full risk sharing, their potential welfare gains after enlargement would be virtually unchanged.

Keywords: EU enlargement, asymmetry of GDP, risk sharing, consumption insurance

Suggested Citation

Demyanyk, Yuliya and Volosovych, Vadym, Macroeconomic Asymmetry in the European Union: The Difference between New and Old Members (January 2005). Available at SSRN: https://ssrn.com/abstract=717687

Yuliya Demyanyk (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland

East 6th & Superior
Cleveland, OH 44101-1387
United States

Vadym Volosovych

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
Room E2-31
3000 DR Rotterdam, 3062PA
Netherlands
+31 10 408 1286 (Phone)
+31 10 408 9165 (Fax)

HOME PAGE: http://https://www.eur.nl/people/vadym-volosovych/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
21
Abstract Views
974
PlumX Metrics