Similar GDP-inflation cycles. An application to CEE countries and the euro area
AbstractIn this paper we look at business cycles similarities between CEE countries and the euro area. Particularly, we uncover GDP-inflation cycles by adopting a trend-cycle decomposition model which allows the trend to be either stochastic or deterministic, i.e. of the non-linear type. Once cyclical components are derived, we test for ex post restrictions at both with-in (GDP-to-inflation) and cross-country (CEECs vs. euro area) levels. Allowing for different degrees of cyclical similarity, we find that a similar inflation vs. GDP cycle is not rejected only for Poland, Lithuania, Romania and Estonia (with Latvia and the euro area being at the boundary). Looking at cross-country results, almost all countries feature a fair degree of similarity with respect to the euro area. Exceptions are Poland, Hungary, Latvia and Slovenia because of lack of a similar cycle either occurring in GDP or inflation, yet not in both. Finally, observing how concurrence between each CEECs cycle and the euro area evolved over time, we find that inflation conditional correlation increased stemming from the EU accession of most CEECs and as a result of the commodity price shock preceding 2008. Further, inflation and GDP conditional correlations receded during the course of 2009–2010, possibly resulting from more idiosyncratic adjustments in the aftermath of the crisis on the monetary/fiscal side. Interestingly, Slovenia, Slovakia, Estonia and Bulgaria display a conditional correlation pattern in GDP and inflation which roughly suggest a strong out-of-phase recovery starting from 2005.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Research in International Business and Finance.
Volume (Year): 27 (2013)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/ribaf
Inflation-GDP gaps; CEECs; Euro-area; Business cycle;
Other versions of this item:
- Macchiarelli, Corrado, 2013. "GDP-Inflation cyclical similarities in the CEE countries and the euro area," Working Paper Series 1552, European Central Bank.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carvalho, Vasco & Harvey, Andrew & Trimbur, Thomas, 2007. "A Note on Common Cycles, Common Trends, and Convergence," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 12-20, January.
- Frenkel, Michael & Nickel, Christiane & Schmidt, Günter, 1999. "Some shocking aspects of EMU enlargement," Research Notes 99-4, Deutsche Bank Research.
- Olivier Jean Blanchard & Danny Quah, 1990.
"The Dynamic Effects of Aggregate Demand and Supply Disturbances,"
NBER Working Papers
2737, National Bureau of Economic Research, Inc.
- Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
- Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
- Iikka Korhonen, 2002.
"Some empirical tests on the integration of economic activity between the euro area and the accession countries,"
- Iikka Korhonen, 2003. "Some empirical tests on the integration of economic activity between the euro area and the accession countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(1), pages 177-196, March.
- Korhonen, Iikka, 2001. "Some empirical tests on the integration of economic activity between the Euro area and the accession countries," BOFIT Discussion Papers 9/2001, Bank of Finland, Institute for Economies in Transition.
- Ruggerone, Luigi, 1996. "Unemployment and Inflationary Finance Dynamics at the Early Stages of Transition," Economic Journal, Royal Economic Society, vol. 106(435), pages 483-94, March.
- Zsolt Darvas & György Szapáry, 2006.
"Business Cycle Synchronization in the Enlarged EU,"
0604, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
- Peter Backé & Jarko Fidrmuc & Thomas Reininger & Franz Schardax, 2002.
"Price Dynamics in Central and Eastern European EU Accession Countries,"
61, Oesterreichische Nationalbank (Austrian Central Bank).
- Peter Back� & Jarko Fidrmuc & Thomas Reininger & Franz Schardax, 2003. "Price Dynamics in Central and Eastern European EU Accession Countries," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 39(3), pages 42-78, May.
- Ilse Mintz, 1969. "Dating Postwar Business Cycles: Methods And Their Application To Western Germany, 1950-67," NBER Books, National Bureau of Economic Research, Inc, number mint69-1.
- Benczúr, Péter & Rátfai, Attila, 2005.
"Economic Fluctuations in Central and Eastern Europe: The Facts,"
CEPR Discussion Papers
4846, C.E.P.R. Discussion Papers.
- Peter Benczur & Attila Ratfai, 2010. "Economic fluctuations in Central and Eastern Europe: the facts," Applied Economics, Taylor and Francis Journals, vol. 42(25), pages 3279-3292.
- Péter Benczúr & Attila Rátfai, 2005. "Economic Fluctuations in Central and Eastern Europe - the Facts," MNB Working Papers 2005/02, Magyar Nemzeti Bank (the central bank of Hungary).
- Harvey, Andrew C & Koopman, Siem Jan, 1992. "Diagnostic Checking of Unobserved-Components Time Series Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 377-89, October.
- Canova, Fabio, 1993.
"Detrending and Business Cycle Facts,"
CEPR Discussion Papers
782, C.E.P.R. Discussion Papers.
- Gallant, A. Ronald & Souza, Geraldo, 1991. "On the asymptotic normality of Fourier flexible form estimates," Journal of Econometrics, Elsevier, vol. 50(3), pages 329-353, December.
- Frankel, Jeffrey A & Rose, Andrew K, 1998.
"The Endogeneity of the Optimum Currency Area Criteria,"
Royal Economic Society, vol. 108(449), pages 1009-25, July.
- Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
- Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc.
- Junsoo Lee & Walter Enders, 2004. "Testing for a unit-root with a nonlinear Fourier function," Econometric Society 2004 Far Eastern Meetings 457, Econometric Society.
- Iikka Korhonen & Jarko Fidrmuc, 2003.
"The euro goes East. Implications of the 2000-2002 economic slowdown for synchronisation of business cycles between the euro area and CEEs,"
- Jarko Fidrmuc & Iikka Korhonen, 2004. "The Euro goes East: Implications of the 2000–2002 Economic Slowdown for Synchronisation of Business Cycles between the Euro area and CEECs," Comparative Economic Studies, Palgrave Macmillan, vol. 46(1), pages 45-62, March.
- Fidrmuc, Jarko & Korhonen, Iikka, 2003. "The euro goes East. Implications of the 2000-2002 economic slowdown for synchronisation of business cycles between the euro area and CEEs," BOFIT Discussion Papers 6/2003, Bank of Finland, Institute for Economies in Transition.
- Natan P. Epstein & Corrado Macchiarelli, 2010. "Estimating Poland's Potential Output: A Production Function Approach," IMF Working Papers 10/15, International Monetary Fund.
- Canova, Fabio, 1998. "Detrending and business cycle facts: A user's guide," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 533-540, May.
- Boone, Laurence & Maurel, Mathilde, 1998. "Economic Convergence of the CEECs with the EU," CEPR Discussion Papers 2018, C.E.P.R. Discussion Papers.
- Bierens, Herman J., 1997. "Testing the unit root with drift hypothesis against nonlinear trend stationarity, with an application to the US price level and interest rate," Journal of Econometrics, Elsevier, vol. 81(1), pages 29-64, November.
- Michael Frenkel & Christiane Nickel, 2005. "How Symmetric are the Shocks and the Shock Adjustment Dynamics between the Euro Area and Central and Eastern European Countries?," Journal of Common Market Studies, Wiley Blackwell, vol. 43(1), pages 53-74, 03.
- Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
- Michael Artis & Massimiliano Marcellino & Tommaso Proietti, 2005. "Business Cycles in the New EU Member Countries and their Conformity with the Euro Area," Journal of Business Cycle Measurement and Analysis, OECD Publishing,CIRET, vol. 2005(1), pages 7-41.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.