The Spillover Effect of Euribor on Southeastern European Economies: A Global VAR Approach

Abstract

In this paper we employ a Global Vector Autoregressive Model (G-VAR) to examine macroeconomic and international monetary spillovers within the South Eastern European Countries over the period 2002–2016. In particular, we investigate how shocks in Euribor affect domestic interest rates, real effective exchange rates, foreign exchange reserves and the industrial production in six countries, namely Bulgaria, Croatia, Greece, North Macedonia, Romania and Slovenia, using monthly data. Our analysis shows that a negative Euribor shock has a positive effect, but of different size, on the industrial production across the countries. There is limited evidence regarding the effects of Euribor on foreign reserves, interest rates, and the real effective exchange rate. Our results provide significant implications and insights for authorities and policy makers. © 2020 Taylor & Francis Group, LLC.