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Revisiting business cycles in the Eurozone: A fuzzy clustering and discriminant approach

Author

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  • Chee-Heong Quah

    (University of Malaya Faculty of Business and Accountancy, Kuala Lumpur, Malaysia)

Abstract

The first part of analysis draws out homogenous clusters of countries out of the 27 EU states based on their business cycle synchronicities with the euro area (EA) 12, quantified by correlations of cycles between the 27 countries’ GDP components and the EA12’s GDP1. The purpose is to compare the obtained country groupings with the countries that have adopted the euro in practice. This exercise is performed using fuzzy cluster analysis and is carried out for pre- and post-euro periods. Knowing that the recent global and euro zone crisis might impact the post-euro findings, the analysis for the post-euro period is done with and without the crisis period. In the second part of the analysis, a discriminant technique is applied to the clustering findings to ascertain the GDP component whose cycle synchronicity contributes most to the partitioning obtained in the cluster analysis. In a nutshell, findings indicate a significant divergence within EU27 and EA12 in the post-euro period and that business cycle symmetry concerning the GDP component of capital investment as a more significant determinant to country partitions.

Suggested Citation

  • Chee-Heong Quah, 2014. "Revisiting business cycles in the Eurozone: A fuzzy clustering and discriminant approach," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(2), pages 161-180, June.
    • Handle: RePEc:aka:aoecon:v:64:y:2014:i:2:p:161-180
    Note: Special thanks to Michael Artis of the University of Manchester and to Patrick Crowley of Texas A&MUniversity for their guidance in the topic. The author is also indebted to the anonymous referees for their constructive comments. The present work was facilitated by a research grant from the University of Malaya (UMRG) of the Social and Behavioural Science (SBS) cluster
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    Citations

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    Cited by:

    1. Chee-Heong Quah, 2017. "Exchange Rate Fixation between US, China, Japan and Eurozone," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 11(2), pages 99-120, May.
    2. Chee-Heong Quah, 2016. "Germany versus the United States: Monetary Dominance in the Eurozone," Economies, MDPI, vol. 4(2), pages 1-16, April.
    3. Quah Chee-Heong, 2019. "China’s Dollar-linked Hong Kong during the Global Crisis," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 38(67), pages 95-121, February.
    4. Jian Zhou & Qina Wang & Chih-Cheng Hung & Fan Yang, 2017. "Credibilistic clustering algorithms via alternating cluster estimation," Journal of Intelligent Manufacturing, Springer, vol. 28(3), pages 727-738, March.
    5. Ahlborn, Markus & Wortmann, Marcus, 2018. "The core‒periphery pattern of European business cycles: A fuzzy clustering approach," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 12-27.

    More about this item

    Keywords

    EMU; business cycle; Euro; monetary union; integration; debt crisis;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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