The European growth synchronization through crises and structural changes

In light of several economic and financial crises and institutional changes experienced by the European countries, we examine whether these economies achieved synchronization of their business cycles and fostered synchronization of their growth rates. Controlling for reverse causality, we conduct multiple endogenous break tests and find (i) several endogenous break dates that correspond to idiosyncratic shocks affecting individual countries, major shocks in international arena but not the adoption of the euro, suggesting that the convergence process has been nonlinear for a number of countries and that studies imposing break dates exogenously, such as the launch of euro, may lead to biased conclusions; (ii) while output growth was increasingly synchronized for some countries, integration occurred in an asymmetric way and it didn't change or didn't occur for others despite being in the same common currency area (iii) convergence has been prevalent among the non-Eurozone economies in our sample.