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Decomposing the co-movement of the business cycle: a time- frequency analysis of growth cycles in the eurozone

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Author Info

  • Patrick Crowley

    (Texas A&M University - Corpus Christi)

  • Jim Lee

    (Texas A&M University - Corpus Christi)

Abstract

This article analyses the frequency components of European business cycles using real GDP by employing multiresolution decomposition (MRD) with the use of maximal overlap discrete wavelet transforms (MODWT). Static wavelet variance and correlation analysis is performed, and phasing is studied using co-correlation with the eurozone by scale. Lastly dynamic conditional correlation GARCH models are used to obtain dynamic correlation estimates by scale against the EU to evaluate synchronicity of cycles through time. The general …ndings are that eurozone members fall into one of three categories: i) high static and dynamic correlations at all frequency cycles (e.g. France, Belgium, Germany), ii) low static and dynamic correlations, with little sign of convergence occurring (e.g. Greece), and iii) low static correlation but convergent dynamic correlations (e.g. Finland and Ireland)

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File URL: http://128.118.178.162/eps/mac/papers/0503/0503015.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0503015.

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Length: 76 pages
Date of creation: 17 Mar 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0503015

Note: Type of Document - pdf; pages: 76
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Web page: http://128.118.178.162

Related research

Keywords: Business cycles; growth cycles; European Union; multiresolution analysis; wavelets; co-correlation; dynamic correlation.;

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  1. AMBLER, Steve & CARDIA, Emanuela & ZIMMERMANN, Christian, 2000. "International Business Cycles: What Are the Facts?," Cahiers de recherche 2000-05, Universite de Montreal, Departement de sciences economiques.
  2. David Backus & Patrick J. Kehoe & Finn E. Kydland, 1993. "International Business Cycles: Theory and Evidence," NBER Working Papers 4493, National Bureau of Economic Research, Inc.
  3. Marianne Baxter & Michael A. Kouparitsas, 2004. "Determinants of Business Cycle Comovement: A Robust Analysis," NBER Working Papers 10725, National Bureau of Economic Research, Inc.
  4. Michael Artis, 2003. "Is there a European Business Cycle?," CESifo Working Paper Series 1053, CESifo Group Munich.
  5. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1991. "International real business cycles," Staff Report 146, Federal Reserve Bank of Minneapolis.
  6. Susanto Basu & Alan M. Taylor, 1999. "Business Cycles in International Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 45-68, Spring.
  7. U. Michael Bergman & Michael D. Bordo & Lars Jonung, 1998. "Historical evidence on business cycles: the international experience," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 42(Jun), pages 65-119.
  8. 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.
  9. Agresti, Anna Maria & Mojon, Benoît, 2001. "Some stylised facts on the euro area business cycle," Working Paper Series 0095, European Central Bank.
  10. A'Hearn, Brian & Woitek, Ulrich, 2001. "More international evidence on the historical properties of business cycles," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 321-346, April.
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