Common Macroeconomic Shocks and Business Cycle Fluctuations in Euro Area Countries

This paper investigates the dynamic effects of common macroeconomic shocks
in shaping business cycle fluctuations in a group of Euro-area countries. In particular, by
using the structural (near)VAR methodology, we investigate the effect of area-wide shocks,
with particular attention to monetary policy shocks. The main conclusion is that: (a)
contractionary monetary policy shocks cause similar recessionary effects in all countries; (b)
as far as business cycle fluctuations are concerned, there is a separation into two distinct
groups of countries, with a first group including the biggest European economies in which
business cycle fluctuations are mainly explained by common, area-wide shocks and a second
one, including Greece, Ireland and Portugal, in which the national shocks play, instead, a
much greater role.