After the launch of the single currency the euro exchange rate fell and interest rates had converged towards the (low) German level. These shocks have worked out differently for the small and large countries. Housing markets have acted as an important vehicle of transmission of these shocks onto economic activity and inflation. Simulations with a stylised econometric model for the euro area economy, making a distinction between the small and large countries in terms of the estimated parameters, illustrate this mechanism ...
Modelling Cyclical Divergence in the Euro Area
The Housing Channel
Working paper
OECD Economics Department Working Papers
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Abstract
In the same series
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Working paper20 September 2024
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5 September 2024
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5 September 2024