Business cycle synchronisation in the European Union: The effect of the common currency
AbstractIn this paper, I analyse the synchronisation of business cycles within the European Union (EU), as this is an important ingredient for the implementation of a successful monetary policy. The business cycles of twelve EU countries and two sub-groups of countries are extracted for the period 1989Q1-2010Q2. The cycle of G3, the group of the three largest European economies (Germany, France and Italy) is then used as a benchmark series for the comparisons. The sensitivity of the data to alternative cycle extraction methodologies is explored employing the Hodrick-Prescott and Baxter-King filters using alternative parameter specifications and leads/lags. The strength of cycle synchronisation is measured using linear regressions, crosscorrelation coefficients and the Cycle Synchronisation Index (CSI). To assess whether synchronisation is stronger after the introduction of the common currency, we also test two sub-samples pre- and post-EMU (1999Q1). The empirical results provide evidence that cycle synchronisation within the euro area has become stronger in the common currency period.
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Bibliographic InfoArticle provided by OECD Publishing,CIRET in its journal OECD Journal: Journal of Business Cycle Measurement and Analysis.
Volume (Year): 2013 (2013)
Issue (Month): 1 ()
Other versions of this item:
- Periklis Gogas, 2013. "Business Cycle Synchronization in the European Union: The Effect of the Common Currency," Working Paper Series 18_13, The Rimini Centre for Economic Analysis.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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