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Business cycle convergence in EMU: A second look at the second moment

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  • Crespo-Cuaresma, Jesús
  • Fernández-Amador, Octavio

Abstract

We analyse the dynamics of the standard deviation of demand and supply shocks as well as of the demand component of GDP across countries in the European Monetary Union (EMU). This analysis allows us to evaluate the patterns of cyclical comovement in EMU and compare them to the cyclical performance of the new members of the European Union (EU) and other OECD countries. We make use of sigma-convergence methods to identify synchronization patterns in business cycles. The Eurozone has converged to a stable lower level of dispersion across business cycles during the end of the 80s and the beginning of the 90s. The new EU members are relatively well synchronized with the EMU, and an enlargement of the EMU to 22 members would not significantly decrease its optimality as a currency area. There is evidence for some Europe-specific characteristics as compared to global comovements in business cycles.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 37 (2013)
Issue (Month): C ()
Pages: 239-259

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Handle: RePEc:eee:jimfin:v:37:y:2013:i:c:p:239-259

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Web page: http://www.elsevier.com/locate/inca/30443

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Keywords: Business cycle synchronization; Structural VAR; Structural shocks; European Monetary Union;

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Cited by:
  1. Tomas Adam & Oxana Babecka Kucharcukova & Jan Babecky & Jan Bruha & Tomas Holub & Eva Hromadkova & David Kocourek & Lubos Komarek & Zlatuse Komarkova & Kamila Kulhava & Petr Kral & Ivana Kubicova & Ji, 2013. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2013," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number as13 edited by Jakub Mateju & Kamila Kulhava, August.
  2. Maria Jesús Delgado-Rodriguez & Sonia De lucas-Santos, 2013. "Testing cyclical convergence with the factor model in the Euro Area," Economics Bulletin, AccessEcon, vol. 33(3), pages 2245-2250.

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