Macroeconomic Shocks In The Cypriot Economy And The Emu-Area Countries

This study analyzes macroeconomic shocks in Cyprus and the EMU-area from the beginning of 1990 to the end of 2004. We examine the relative importance of aggregate demand and supply shocks along with money, in explaining short-run real output fluctuations. The empirical results for the analysis are obtained by using the framework of structural vector autoregression model (SVAR). The structural impulses in the VAR model are defined as shocks in aggregate demand, aggregate supply and money growth. Results indicate that shocks in AD, AS, the money growth are all sources of macro shocks in Cyprus and the EMU-area.