Business Cycle Synchronisation with the Euro Area Countries at Times of Crisis: Differences Between SEE and CEE Countries

The aim of the paper is to analyse business cycle synchronisation patterns that the countries of the CESEE region have in relation to the original 12 Euro area member states. We focus on the turbulent times entailed in the latest economic crisis in order to examine whether the synchronisation patterns for the group of countries that have already established closer links to the EU differ from those in the countries pursuing the same path. Our analysis rests on the three well-established channels of business cycle synchronisation: trade, financial integration and sectoral specialisation. Given that the latest economic crisis was caused and transmitted by financial markets, we focus more on financial integration indicators. The results suggest that the synchronisation patterns differ between the two groups of countries and that the financial integration channel is important for the CEE countries, while synchronisation for the SEE countries is supported by the trade channel.