Business Cycle Dynamics in the CEE Countries: A Political Economy Approach
AbstractThis paper uses a simple VAR analysis to examine 5 CEE countries (the Czech Republic, Hungary, Poland, Romania and Slovakia) in order to understand whether their business cycles are synchronized with each other and/or with the major economies that they are supposed to be linked with, namely the US, Germany and Russia. We find that there are differences across the CEE countries themselves and that there is no common CEE business cycle. Comparing the individual CEE business cycles with those of the dominant economies, we find that Hungary and Poland are related to the US business cycle, reflecting the fact that they are more integrated with the global economy, whereas Slovakia is closer to the Russian cycle. Finally, splitting the sample into the late 1990s and 2000s due to the transition nature of these economies in the former period shows that the influence of Russia on the CEE economies has declined over time. However, in contrast to the expectations that CEE countries are likely to be affected by Germany in the second half of the sample due to EU negotiations followed by full membership, among the CEE countries only the business cycle of Slovakia is synchronized with that of Germany. On the other hand the Czech Republic, Hungary and Poland are synchronized with the US business cycle, showing that globalization has decreased the importance of distance.
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Bibliographic InfoPaper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 1014.
Length: 29 pages
Date of creation: Apr 2010
Date of revision:
Business cycle synchronization; CEE countries; EMU;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F15 - International Economics - - Trade - - - Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-02 (All new papers)
- NEP-EEC-2010-05-02 (European Economics)
- NEP-MAC-2010-05-02 (Macroeconomics)
- NEP-OPM-2010-05-02 (Open Economy Macroeconomics)
- NEP-TRA-2010-05-02 (Transition Economics)
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- David Matesanz Gomez & Guillermo J Ortega & Benno Torgler, 2012.
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- Martin Feldkircher, 2013. "A Global Macro Model for Emerging Europe," Working Papers 185, Oesterreichische Nationalbank (Austrian Central Bank).
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