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Business cycle transmission between France and United Kingdom.
- Source :
- Journal of Economic Studies; 2023, Vol. 50 Issue 8, p1926-1938, 13p
- Publication Year :
- 2023
-
Abstract
- Purpose: The literature mostly investigates the business cycle transmission of the United Kingdom (UK) and France as a part of a wider group (e.g. European Exchange Rate Mechanism or G7), despite their historical links and regional significance. Thus, herein paper aims to analyse the inter-dependence of these economies and how a shock from one of them affects the other for the data since 1978 to 2019. Design/methodology/approach: In this paper, first, preliminary statistics were calculated in order to describe the historical relationship between these countries. The econometric part estimates the vector auto-regression model (VAR) to assess the inter-dependence of the economies. VAR model allows further to inspect the impulse response functions that shows the shock dynamics from one country to another. In order to verify if a shock from one of the economies is important to another, the study uses granger causality test. Findings: The study establishes a strong link between these countries. A business cycle is transmitted significantly between the economies of France and UK, with a single standard deviation shock from France resulting in a long term effect of 0.4% change in gross domestic product (GDP) of UK and 1% vice versa. Additionally changes in GDP of both of the countries significantly Granger-cause change to GDP of the corresponding economy. Originality/value: This is the first empirical study investigating the business cycle transmission between France and UK and providing a quantitative assessment of their inter-dependence. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 01443585
- Volume :
- 50
- Issue :
- 8
- Database :
- Complementary Index
- Journal :
- Journal of Economic Studies
- Publication Type :
- Academic Journal
- Accession number :
- 173727298
- Full Text :
- https://doi.org/10.1108/JES-01-2023-0044