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Article

Shocks Transmission in the Mediterranean Zone

Sliti Hamadi, 2013

Economics Bulletin, 33, 2, 1010-1028, Septembre 2013

Résumé

This paper examines macroeconomic interdependency of the Mediterranean countries and the transmission of shocks. Using a non standard VAR model, we were able to jointly model the direct and indirect transmission mechanisms of economic fragilities and to evaluate contagion effects of shocks by computing functions of instantaneous and cumulative responses, analysing Granger-like causality links, instantaneous causality and indices of shocks transmission for each country. The results indicate that business exchanges play a determining role in transmitting economic turmoil in the short and in the long-run. Shocks transmission effects take between 12 to 34 months depending on the countries, to reach a definite end. European Mediterranean countries show signs of higher effects. Transmission indices are important for big countries reflecting a higher contagion power at play. Nevertheless, shocks transmission remains highly correlated to the trade influence of the country, rather than to its size. A high degree of synchronisation of economic activities is observed for the European Mediterranean countries which are revealed to be producers of economic fluctuations in the zone. The minimal transmission thresholds are observed for the African Mediterranean countries which are revealed to be receptors of shocks.