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A fresh look at business cycle synchronisation in the euro area

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  • Christian Gayer
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    Abstract

    This paper revisits the issue of business cycle synchronisation in the euro area looking back on more than eight years of EMU experience. The dispersion of output gaps across Member States has reached historically low levels since around 2002. Yet, this observation seems to reflect a general decrease in the amplitude of cyclical fluctuations rather than a continued increase in business cycle synchronisation. Using cross-country correlations, the mean level of synchronisation of national cycles within the currency union since 1999 is found to be overall high, though not higher than in the first half of the nineties. Around 2003, the level of cross-country synchronisation experienced a quite abrupt decrease. This picture is shared between several measures of the business cycle. A rebound and partial recovery of cross-country synchronisation is indicated from around 2004 onwards. The observed dip in synchronisation thus appears to be a transitory phenomenon, partly rooted in a recurrent pattern of falling business cycle synchronisation in early recovery phases.

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    File URL: http://ec.europa.eu/economy_finance/publications/publication9499_en.pdf
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    Bibliographic Info

    Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 287.

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    Length: 32 pages
    Date of creation: Oct 2007
    Date of revision:
    Handle: RePEc:euf:ecopap:0287

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    Related research

    Keywords: Business cycles; synchronisation; convergence; EMU;

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    Cited by:
    1. Luís Aguiar-Conraria & Manuel M. F. Martins & Maria Joana Soares, 2011. "Synchronization of Economic Sentiment Cycles in the Euro Area: a time-frequency analysis," CEF.UP Working Papers 1105, Universidade do Porto, Faculdade de Economia do Porto.
    2. Jonsson, Andreas & Lindén, Staffan, 2009. "The quest for the best consumer confidence indicator," MPRA Paper 25515, University Library of Munich, Germany.
    3. Andreas Jonsson & Staffan Lindén, 2009. "The quest for the best consumer confidence indicator," European Economy - Economic Papers 372, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
    4. Marcus Kappler, 2011. "Business Cycle Co-movement and Trade Intensity in the Euro Area: is there a Dynamic Link?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 231(2), pages 247-265, April.
    5. Christian Aubin & Ibrahima Diouf & Dominique Pepin, 2010. "Inertie De La Politique Monétaire Dans La Zone Euro : Le Rôle De L'Hétérogénéité," Post-Print hal-00960030, HAL.

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