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Structural Similarity as a Determinant of Business Cycle Synchronization in the European Union: A Robust Analysis

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  • Krzysztof Beck

    (Lazarski University, Faculty of Economics and Management)

Abstract

This paper presents evidence of the significant impact of structural similarities on business cycle synchronization. Using Sala-i-Martin’s methodology (1997a; 1997b), proven correlation coefficients of structural shares are offered as robust determinants of business cycle synchronization. The results are not only robust across different levels of disaggregation, but also for value added and employment shares. The results are not robust across measures. The linear measure has proven to be a bad proxy for structural similarities as a determinant of business cycle synchronization. The degree of convergence is also a robust determinant of business cycle synchronization, with the negative point estimate. This might be explained by Imbs and Wacziarg’s U-Shape specialization curve. Convergence might lead to higher business cycle synchronization through the channel of specialization. This notion is confirmed by the results of simultaneous equations estimation. Finally, evidence is found that higher structural similarities can better foster a similar response to external exogenous economic shocks.

Suggested Citation

  • Krzysztof Beck, 2013. "Structural Similarity as a Determinant of Business Cycle Synchronization in the European Union: A Robust Analysis," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 5(2).
    • Handle: RePEc:ttu:rebcee:48
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    Cited by:

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    2. Ionuț JIANU, 2020. "Examining the drivers of business cycle divergence between Euro Area and Romania," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(623), S), pages 19-32, Summer.
    3. Valerija Botric & Tanja Broz, 2016. "Exploring CESEE-EMU Synchronisation Patterns," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 18(42), pages 255-255, May.
    4. Valerija Botric & Tanja Broz & Sasa Jaksic, 2019. "Business Cycle Synchronisation with the Euro Area Countries at Times of Crisis: Differences Between SEE and CEE Countries," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 17(2), pages 175-191.
    5. Jianu, Ionut, 2020. "Examining the drivers of business cycle divergence between Euro Area and Romania," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 27(2), pages 19-32.
    6. Krzysztof Beck, 2016. "Business Cycle Synchronization In European Union: Regional Perspective," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 11(4), pages 785-815, December.

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