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Business cycles in EU new member states: How and why are they different?

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Abstract

This paper uses the business cycle accounting framework to investigate the differences between economic fluctuations in Central and Eastern European (CEE) countries and the euro area. We decompose output movements into the contributions of four economic wedges, affecting the production technology, the agents’ intra- and intertemporal choices, and the aggregate resource constraint. We next analyze the observed cross-country differences in business cycles with respect to these four identified wedges. Our results indicate that business cycles in the CEE countries do differ from those observed in the euro area, even though substantial convergence has been achieved after the eastern EU enlargement. The major differences concern the importance of the intraand intertemporal wedges, which account for a larger proportion of output fluctuations in the CEE region and also exhibit relatively little comovement with their euro area counterparts.

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Bibliographic Info

Paper provided by National Bank of Poland, Economic Institute in its series National Bank of Poland Working Papers with number 156.

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Length: 28
Date of creation: 2013
Date of revision:
Handle: RePEc:nbp:nbpmis:156

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Keywords: business cycle accounting; business cycle synchronization;

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Cited by:
  1. Martin SLANICAY, 2013. "Business Cycle Synchronization through the Lens of a DSGE Model," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(2), pages 180-196, May.

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