Linkages between the Eurozone and the South-Eastern European countries: A global VAR analysis

- Assess the impact of the Eurozone's economic policies on South-Eastern Europe
- Implement the GVAR model for capturing the economic interdependence
- All countries, except Turkey, react similarly to Eurozone's macroeconomic policies.
- All countries, except Turkey, react similarly to changes in the €/$ exchange rate.
- Linkages among sample countries and between each of them and the Eurozone

In the present paper we assess the impact of the Eurozone's economic policies on specific South-Eastern European countries, namely Bulgaria, Croatia, Cyprus, Greece, Romania, Slovenia and Turkey. Since these countries are connected to the EU or the Eurozone and economic interdependence among them is continuously evolving, we implemented a Global VAR model. Our results indicate that all sample countries, except Turkey, react in a similar manner to changes (a) in the macroeconomic policies of the Eurozone, and (b) in the nominal exchange rate of the euro against the US dollar. There is evidence of linkages among the EU or Eurozone members of the region, and between each of them and the Eurozone.