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Measuring Synchronisation and Convergence of Business Cycles

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  • Siem Jan Koopman

    ()
    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Joao Valle e Azevedo

    ()
    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

Abstract

This paper investigates business cycle relations among different economies in theEuro area. Cyclical dynamics are explicitly modelled as part of a time series model. Weintroduce mechanisms that allow for increasing or diminishing phase shifts and for time-varyingassociation patterns in different cycles. Standard Kalman filter techniques are used toestimate the parameters simultaneously by maximum likelihood. The empirical illustrationsare based on gross domestic product (GDP) series of seven European countries which are comparedwith the GDP series of the Euro Area and that of the United States. The original integratedtime series are band-pass filtered. We find that there is an increasing resemblance between thebusiness cycle fluctuations of the European countries analysed and those of the Euro area,although with varying patterns.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 03-052/4.

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Date of creation: 13 Jun 2003
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Handle: RePEc:dgr:uvatin:20030052

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Web page: http://www.tinbergen.nl

Related research

Keywords: Band-pass filter; Cyclical convergence; Kalman filter; Unobserved components time series models; Phase shifts.;

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References

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  1. Mike Artis & Hans-Martin Krolzig & Juan Toro, 2004. "The European business cycle," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 1-44, January.
  2. Fagan, Gabriel & Henry, Jerome & Mestre, Ricardo, 2005. "An area-wide model for the euro area," Economic Modelling, Elsevier, Elsevier, vol. 22(1), pages 39-59, January.
  3. Gerhard Runstler, 2004. "Modelling phase shifts among stochastic cycles," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 7(1), pages 232-248, 06.
  4. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series, European Central Bank 0042, European Central Bank.
  5. Artis, Michael J & Zhang, W, 1997. "International Business Cycles and the ERM: Is There a European Business Cycle?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 2(1), pages 1-16, January.
  6. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band Pass Filter," NBER Working Papers 7257, National Bureau of Economic Research, Inc.
  7. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  8. Angeloni, Ignazio & Dedola, Luca, 1999. "From the ERM to the euro: new evidence on economic and policy convergence among EU countries," Working Paper Series, European Central Bank 0004, European Central Bank.
  9. Siem Jan Koopman & Neil Shephard & Jurgen A. Doornik, 1999. "Statistical algorithms for models in state space using SsfPack 2.2," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 2(1), pages 107-160.
  10. Francis X. Diebold & Glenn D. Rudebusch, 1994. "Measuring Business Cycles: A Modern Perspective," NBER Working Papers 4643, National Bureau of Economic Research, Inc.
  11. Robert F. Engle & Sharon Kozicki, 1990. "Testing For Common Features," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0091, National Bureau of Economic Research, Inc.
  12. Durbin, James & Koopman, Siem Jan, 2001. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198523543, October.
  13. Tamim Bayoumi & Barry Eichengreen, 1992. "Shocking Aspects of European Monetary Unification," NBER Working Papers 3949, National Bureau of Economic Research, Inc.
  14. Don Harding & Adrian Pagan, 1999. "Dissecting the Cycle," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp1999n13, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  15. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 357-84, March.
  16. Hans-Martin Krolzig & Juan Toro, 2002. "Classical and Modern Business Cycle Measurement: The European Case," Economic Working Papers at Centro de Estudios Andaluces E2002/20, Centro de Estudios Andaluces.
  17. Rob Luginbuhl & Siem Jan Koopman, 2003. "Convergence in European GDP Series," Tinbergen Institute Discussion Papers, Tinbergen Institute 03-031/4, Tinbergen Institute.
  18. Annette Bongardt & Francisco Torres & Carsten Hefeker & Pierre Wunsch & Christoph Hermann, 2013. "Convergence in the EU," Intereconomics: Review of European Economic Policy, Springer, Springer, vol. 48(2), pages 72-92, March.
  19. Rob Luginbuhl & Siem Jan Koopman, 2004. "Convergence in European GDP series: a multivariate common converging trend-cycle decomposition," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(5), pages 611-636.
  20. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 5(1), pages 7-29, January.
  21. Harvey, A C, 1985. "Trends and Cycles in Macroeconomic Time Series," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 3(3), pages 216-27, June.
  22. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 11(4), pages 393-95, October.
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Cited by:
  1. Christos S. Savva & Kyriakos C. Neanidis & Denise R. Osborn, 2007. "Business Cycle Synchronization of the Euro Area with the New and Negotiating Member Countries," Centre for Growth and Business Cycle Research Discussion Paper Series, Economics, The Univeristy of Manchester 91, Economics, The Univeristy of Manchester.
  2. Matteo M. Pelagatti, 2005. "Business cycle and sector cycles," Econometrics, EconWPA 0503006, EconWPA.
  3. Siklos, Pierre L., 2012. "No coupling, no decoupling, only mutual inter-dependence: Business cycles in emerging vs. mature economies," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 17/2012, Bank of Finland, Institute for Economies in Transition.
  4. Juergen Bierbaumer-Polly, 2012. "Regional and Sectoral Business Cycles - Key Features for the Austrian economy," EcoMod2012 4074, EcoMod.
  5. Periklis Gogas, 2013. "Business Cycle Synchronization in the European Union: The Effect of the Common Currency," Working Paper Series, The Rimini Centre for Economic Analysis 18_13, The Rimini Centre for Economic Analysis.
  6. Matthieu Lemoine, 2006. "Annex A5 : A model of the stochastic convergence between euro area business cycles," Sciences Po publications info:hdl:2441/1461, Sciences Po.
  7. Matthieu Lemoine, 2005. "A model of the stochastic convergence between business cycles," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2005-05, Observatoire Francais des Conjonctures Economiques (OFCE).

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