Financial integration and the construction of historical financial data for the Euro Area

Heather M. Anderson, Mardi Dungey, Denise R. Osborn, Farshid Vahid

Research output: Contribution to journalArticlepeer-review

Abstract

Time series analysis for the Euro Area requires the availability of sufficiently long historical data series, but the appropriate construction methodology has received little attention. The benchmark dataset, developed by the European Central Bank for use in its Area Wide Model (AWM), is based on fixed-weight aggregation across countries with historically distinct monetary policies and financial markets of varying international importance. This paper proposes a new methodology for producing back-dated financial series for the Euro Area, that is based on the time-varying distance of periphery countries from core countries with respect to monetary integration. Historical decompositions of the residuals of vector autoregressive models of the Euro Area economy are then used to explore and compare the monetary policy implications of using the new methodology versus the use of AWM fixed weight series. © 2011 Elsevier B.V.
Original languageEnglish
Pages (from-to)1498-1509
Number of pages11
JournalEconomic Modelling
Volume28
Issue number4
DOIs
Publication statusPublished - Jul 2011

Keywords

  • Data aggregation
  • Euro Area
  • Financial market indicators
  • Historical decomposition
  • Monetary integration

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