Advanced Search
MyIDEAS: Login

Business Cycle Synchronization in the Euro Area and the Impact of the Financial Crisis

Contents:

Author Info

  • Martin Gächter

    ()
    (Oesterreichische Nationalbank, Foreign Research Division)

  • Aleksandra Riedl

    ()
    (Oesterreichische Nationalbank, Foreign Research Division)

  • Doris Ritzberger-Grünwald

    ()
    (Oesterreichische Nationalbank)

Abstract

The extent of synchronization of national business cycles is a widespread indicator for gauging whether individual countries are indeed ready to adopt a common currency. The occurrence of asymmetric shocks and their consequences in Economic and Monetary Union (EMU) may hamper implementation of monetary policy, as such shocks may significantly raise the cost of the single monetary policy for individual countries. This study analyzes whether the synchronization pattern of business cycles in the euro area has systematically changed since the outbreak of the global financial crisis in 2008. Country-specific differences in the terms of trade and fiscal imbalances may have caused the global shock to affect euro area countries asymmetrically. Conversely, the business cycles of individual countries may have become more closely synchronized, as all countries slipped into recession at the same time. For the purpose of this study we use empirical data to establish which of the two effects dominates. The results of the analysis show a pronounced desynchronization of business cycles during the crisis period, both with respect to dispersion and to the correlation of business cycles. Moreover, interesting differences and parallels may be observed between the developments since the beginning of the most recent financial crisis and an earlier period, around 2004, when the output gap in the euro area was negative as well.

Download Info

If 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.
File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Monetary-Policy-and-the-Economy/2012/Monetary-Policy-and-the-Economy-Q2-12/chapters/mop_2012_q2_analyse02_tcm16-249562.pdf
Download Restriction: no

Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

Volume (Year): (2012)
Issue (Month): 2 ()
Pages: 33–60

as in new window
Handle: RePEc:onb:oenbmp:y:2012:i:2:b:2

Contact details of provider:
Postal: P.O. Box 61, A-1011 Vienna, Austria
Phone: +43/1/404 20 7405
Fax: +43/1/404 20 7499
Email:
Web page: http://www.oenb.at
More information through EDIRC

Order Information:
Postal: Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria
Email:

Related research

Keywords: Keywords: business cycles; European Monetary Union; convergence; financial crisis;

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Camacho, Maximo & Perez-Quiros, Gabriel & Saiz, Lorena, 2006. "Are European business cycles close enough to be just one?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1687-1706.
  2. Domenico Giannone & Michele Lenza & Lucrezia Reichlin, 2008. "Business Cycles in the Euro Area," NBER Working Papers 14529, National Bureau of Economic Research, Inc.
  3. Canova, Fabio & Ciccarelli, Matteo & Ortega, Eva, 2004. "Similarities and Convergence in G7 Cycles," CEPR Discussion Papers 4534, C.E.P.R. Discussion Papers.
  4. Sopraseuth, T., 2000. "Exchange Rate Regimes and International Business Cycle," Papiers d'Economie Mathématique et Applications 2000.17, Université Panthéon-Sorbonne (Paris 1).
  5. Jakob de Haan & Robert Inklaar & Richard Jong-A-Pin, 2008. "Will Business Cycles In The Euro Area Converge? A Critical Survey Of Empirical Research," Journal of Economic Surveys, Wiley Blackwell, vol. 22(2), pages 234-273, 04.
  6. Jesús Crespo-Cuaresma & Octavio Fernández-Amador, 2010. "Business cycle convergence in EMU: A first look at the second moment," FIW Working Paper series 054, FIW.
  7. Alberto Alesina & Robert Barro & Silvana Tenreyro, 2002. "Optimal Currency Areas," Harvard Institute of Economic Research Working Papers 1958, Harvard - Institute of Economic Research.
    • Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2003. "Optimal Currency Areas," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 301-356 National Bureau of Economic Research, Inc.
  8. Francesco Paolo Mongelli, 2008. "European Economic and Monetary Integration, and the Optimum Currency Area Theory," European Economy - Economic Papers 302, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  9. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. James Mitchell & Michael Massmann, 2004. "Reconsidering the evidence: are Eurozone business cycles converging?," Money Macro and Finance (MMF) Research Group Conference 2003 67, Money Macro and Finance Research Group.
  11. Athanasios Orphanides & Simon Van_Norden, 2000. "The Reliability of Output Gap Estimates in Real Time," Econometric Society World Congress 2000 Contributed Papers 0768, Econometric Society.
  12. Böwer, Uwe & Guillemineau, Catherine, 2006. "Determinants of business cycle synchronisation across euro area countries," Working Paper Series 0587, European Central Bank.
  13. Klaus Weyerstrass & Bas Aarle & Marcus Kappler & Atilim Seymen, 2011. "Business Cycle Synchronisation with(in) the Euro Area: in Search of a ‘Euro Effect’," Open Economies Review, Springer, vol. 22(3), pages 427-446, July.
  14. George Tavlas, 1994. "The theory of monetary integration," Open Economies Review, Springer, vol. 5(2), pages 211-230, March.
  15. Martin Carree & Luuk Klomp, 1997. "Testing The Convergence Hypothesis: A Comment," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 683-686, November.
  16. Joffrey Malek Mansour, 2003. "Do national business cycles have an international origin?," ULB Institutional Repository 2013/13490, ULB -- Universite Libre de Bruxelles.
  17. Marcellino, Massimiliano & Musso, Alberto, 2010. "Real time estimates of the euro area output gap: reliability and forecasting performance," Working Paper Series 1157, European Central Bank.
  18. Fleming, J Marcus, 1971. "On Exchange Rate Unification," Economic Journal, Royal Economic Society, vol. 81(323), pages 467-88, September.
  19. Carlo Altavilla, 2004. "Do EMU Members Share the Same Business Cycle?," Journal of Common Market Studies, Wiley Blackwell, vol. 42(5), pages 869-896, December.
  20. M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2003. "International Business Cycles: World, Region, and Country-Specific Factors," American Economic Review, American Economic Association, vol. 93(4), pages 1216-1239, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Svatopluk Kapounek & Jitka Pomenkova, 2012. "The Endogeneity of Optimum Currency Areas Criteria in the Context of Financial Crisis: Evidence from Time-Frequency Domain Analysis," MENDELU Working Papers in Business and Economics 2012-31, Mendel University in Brno, Faculty of Business and Economics.
  2. Petr Rozmahel & Ludek Kouba & Ladislava Grochová & Nikola Najman, 2013. "Integration of Central and Eastern European Countries: Increasing EU Heterogeneity?," WWWforEurope Working Papers series 9, WWWforEurope.
  3. Quint, Dominic, 2014. "Is it really more dispersed? Measuring and comparing the stress from the common monetary policy in the euro area," Discussion Papers 2014/13, Free University Berlin, School of Business & Economics.
  4. Escañuela Romana, Ignacio, 2013. "¿Convergen los ciclos económicos de los estados de la zona euro?: evidencia empírica
    [Do Economic Cycles Converge In The Euro Zone?: Empirical Evidence]
    ," MPRA Paper 48145, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:onb:oenbmp:y:2012:i:2:b:2. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudia Kwapil).

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.