Economic interdependency between Mezzogiorno and the Centre-North: empirical evidence from A multi-regional VAR model Objectives

Author/s Valter Di Giacinto
Publishing Year 2012 Issue 2012/1 Language Italian
Pages 31 P. 11-41 File size 884 KB
DOI 10.3280/REST2012-001002
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In this paper the scope of economic interdependencies between the Northern and Southern Italian areas is assessed by means of a model-based measure of the mutual transmission of macroeconomic disturbances. Methods and Results A novel methodological approach is applied in the paper. The methodology hinges on the specification and estimation of a multi-regional VAR (Vector Autoregressive) model. Model specification nests the traditional gravity approach to trade flows analysis and spatial econometrics techniques within a structural VAR model, allowing for the separate identification of two sets of regional macroeconomic shocks, which can be broadly assumed to capture local shifts in aggregate demand and supply conditions. The proposed model-based measure of economic integration between two areas is given by the dynamic long run cross-elasticity of GDP in one area to shocks originating in the other area. Conclusions Estimation results show a substantial propagation of macroeconomic shocks between the two Italian areas, mainly operating through strong trade linkages on the demand side. The long run elasticity of GDP in the Southern area to exogenous demand fluctuations in the Centre North turns out to be higher than in the opposite direction, mostly due to the larger size of the Centre North economy. On the contrary, the absolute marginal effect on the GDP level of a demand shock of given monetary amount in the partner area appears to be larger for the Centre North than for the Mezzogiorno.

Keywords: Economic interdependence, trade linkages, Mezzogiorno, VAR model, spatial econometrics, space-time impulse response

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Valter Di Giacinto, Il grado di integrazione economica tra mezzogiorno e centro-nord: evidenze empiriche da un modello var multi-regionale in "RIVISTA DI ECONOMIA E STATISTICA DEL TERRITORIO" 1/2012, pp 11-41, DOI: 10.3280/REST2012-001002