Spatial Transmission of Macroeconomic Shocks across European Regions: A Spatial VAR Analysis (2000-2025)

This paper investigates the spatial transmission of macroeconomic shocks across European regions using a spatial vector autoregressive (SVAR) framework that explicitly accounts for interregional interdependencies. Focusing on GDP growth, unemployment, inflation, and credit growth, the analysis combines spatial impulse response functions, forecast error variance decompositions, and spatial propagation maps to characterize both the dynamic and geographic diffusion of shocks. The results show that macroeconomic disturbances generate economically meaningful but ultimately transitory effects, with responses converging to their long-run equilibria in the medium term. While own shocks dominate short-run dynamics, cross-variable and cross-regional spillovers become increasingly important over longer horizons. A spatial propagation exercise illustrates how shocks originating in economically central regions—such as Germany—diffuse progressively to neighboring and more distant regions with diminishing intensity. Finally, a network-based index is used to identify systemically important regions, revealing substantial heterogeneity in regional influence that depends not only on economic size but also on connectedness and spillover capacity. Overall, the findings highlight that Europe should be viewed as a networked economic system characterized by asymmetric shock transmission, with important implications for regional stabilization, monetary policy, and macroprudential surveillance. JEL Classification : C31; C33; E32; E44; R11; R15