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Synchronization of Economic Sentiment Cycles in the Euro Area: a time-frequency analysis

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Author Info

  • Luís Aguiar-Conraria

    ()
    (Universidade do Minho, NIPE, and Escola de Economia e Gestão)

  • Manuel M. F. Martins

    ()
    (Cef.up, Faculdade de Economia, Universidade do Porto)

  • Maria Joana Soares

    ()
    (Universidade do Minho, NIPE, and Departmento de Matemática)

Abstract

We use wavelet tools and Economic Sentiment Indicators to study the synchronization of economic cycles in the Euro Area. We assess the time-varying and frequency-varying pattern of business cycles synchronization in the Area and test the impact of the creation of the European Monetary Union in 1999. Among several results, we find that (a) the EMU is associated with a significant increase in synchronization of economic sentiment in the Euro Area; (b) the hard-peg of its currency to the Euro led to a comparable synchronization of Denmark's economic sentiment after 1999, differently from what happened in the case of the UK.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 1105.

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Length: 25 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:por:cetedp:1105

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Related research

Keywords: Business cycle synchronization; Economic sentiment; Euro Area; Continuous wavelet transform; Wavelet coherency; Wavelet distance; Phase-difference.;

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References

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  1. Carlo Altavilla, 2004. "Do EMU Members Share the Same Business Cycle?," Journal of Common Market Studies, Wiley Blackwell, vol. 42(5), pages 869-896, December.
  2. Domenico Giannone & Michele Lenza & Lucrezia Reichlin, 2010. "Business Cycles in the Euro Area," NBER Chapters, in: Europe and the Euro, pages 141-167 National Bureau of Economic Research, Inc.
  3. Camacho, Maximo & Perez-Quiros, Gabriel & Saiz, Lorena, 2006. "Are European business cycles close enough to be just one?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1687-1706.
  4. Christian Richter & Andrew Hughes Hallett, 2005. "A Time-Frequency Analysis of the Coherences of the US Business," Computing in Economics and Finance 2005 45, Society for Computational Economics.
  5. António Rua, 2010. "Measuring comovement in the time-frequency space," Working Papers w201001, Banco de Portugal, Economics and Research Department.
  6. Andrew Hughes Hallett & Christian Richter, 2008. "Have the Eurozone economies converged on a common European cycle?," International Economics and Economic Policy, Springer, vol. 5(1), pages 71-101, July.
  7. Crowley , Patrick & Maraun , Douglas & Mayes , David, 2006. "How hard is the euro are core? An evaluation of growth cycles using wavelet analysis," Research Discussion Papers 18/2006, Bank of Finland.
  8. Artis, M. & Krolzig, H.-M. & Toro, J., 1999. "The European Business Cycle," Economics Working Papers eco99/24, European University Institute.
  9. Luís Francisco Aguiar & Pedro C. Magalhães & Maria Joana Soares, 2011. "Cycles in Politics: Wavelet Analysis of Political Time-Series," NIPE Working Papers 25/2011, NIPE - Universidade do Minho.
  10. Aguiar-Conraria, Luís & Azevedo, Nuno & Soares, Maria Joana, 2008. "Using wavelets to decompose the time–frequency effects of monetary policy," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(12), pages 2863-2878.
  11. Siem Jan Koopman & Jo�o Valle E Azevedo, 2008. "Measuring Synchronization and Convergence of Business Cycles for the Euro area, UK and US," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(1), pages 23-51, 02.
  12. Máximo Camacho & Gabriel Pérez-Quirós & Lorena Saiz, 2005. "Do european business cycles look like one?," Banco de Espa�a Working Papers 0518, Banco de Espa�a.
  13. Andrew Hughes Hallett, Christian R Richter, 2001. "Spectral Analysis as a Tool for Financial Policy: An Analysis of the Short-End of the British Term Structure," Computing in Economics and Finance 2001 127, Society for Computational Economics.
  14. Christian Gayer, 2007. "A fresh look at business cycle synchronisation in the euro area," European Economy - Economic Papers 287, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  15. Andrew Hallett & Christian Richter, 2006. "Measuring the Degree of Convergence among European Business Cycles," Computational Economics, Society for Computational Economics, vol. 27(2), pages 229-259, May.
  16. Sarah Gelper & Christophe Croux, 2010. "On the Construction of the European Economic Sentiment Indicator," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 47-62, 02.
  17. D. Furceri & G. Karras, 2008. "Business-cycle synchronization in the EMU," Applied Economics, Taylor & Francis Journals, vol. 40(12), pages 1491-1501.
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