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Determinants of Business Cycle Convergence in Euro Area. The Romanian Case

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  • Marius-Corneliu Marinas

    (Academy of Economic Studies, Bucharest)

Abstract

In the OCA theory, the higher economic openness and closer economic cooperation automatically lead to the convergence of business cycles. Krugman (1993) presented and alternative view on this issue. In his opinion, closer trade ties result in better allocation of resources and higher output specialization of individual countries. As the industrial production in individual countries is becoming narrowly specialized, economies of such countries become more vulnerable and more predisposed to respond to shocks asymmetrically. The probability that shocks will be asymmetric or have asymmetric impact depends on the structure of the economy. If the structure of the economy is significantly different from the euro area, even the same shocks may have a different impact on a country and lead to asynchronous business cycle.

Suggested Citation

  • Marius-Corneliu Marinas, 2006. "Determinants of Business Cycle Convergence in Euro Area. The Romanian Case," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 10(10(505)), pages 45-54, December.
    • Handle: RePEc:agr:journl:v:10(505):y:2006:i:10(505):p:45-54
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    Cited by:

    1. Alexe, Ileana & Tatomir, Cristina F., 2011. "Does economic convergence with the European Union mean more FDI flows to an economy? Analysis on 5 Central and Eastern Europe countries," MPRA Paper 36139, University Library of Munich, Germany.

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