Dynamics of macroeconomic shock absorption mechanisms

 This work addresses a highly important macroeconomic issue for the New Member States of European Union (EU) in the context of the integration process towards european structures these economies are experiencing after the EU accession. Macroeconomic mechanisms to accommodate shocks in the economy lose some degrees of freedom with the adoption of the euro and the abandoning of the central bank's instruments of action represented by the monetary policy interest rate and nominal exchange rate. In this context, increased labour market flexibility in countries which intend to join European Monetary Union is an appropriate channel through which asymmetric shocks in the economy can be accommodated. The issue regarding the opportunity of euro adoption is of utmost relevance considering the efforts to fulfil the nominal and real convergence criteria in order to join Exchange Rate Mechanism II and, at a later stage, to accede to the Eurozone. In order to assess the dynamics of macroeconomic shock absorption mechanisms in case of EU New Member States a wide range of econometric models starting with simple ones, which are specific to classical time series analysis and ending with a dynamic stochastic general equilibrium model, derived from microeconomic fundamentals are employed. This diversity of analytic tools is necessary to ensure the robustness of results considering that the current macroeconomic evolutions are characterized by uncertainties and the possible sources of divergent results are multiple. The causes of the latter refer to the economic model specification, data error measurement, structural breaks in data series or difficult to anticipate shocks, which impact the dynamics of the macroeconomic system.