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Business Cycle Synchronization in the Enlarged EU: The Role of Bilateral Trade and FDI

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  • Dimitrios Asteriou
  • Argiro Moudatsou

Abstract

The aim of this paper is to investigate the determinants of business cycle (BC) synchronization across 21 (old and new) countries of the enlarged European Union (EU). It utilizes international data to evaluate the linkages among bilateral trade in goods, bilateral foreign direct investment (FDI) flows and BC co-movements. The paper contributes to the current literature by examining the relationship using the latest available data (sample range: 1998–2011), and thus taking into account the European sovereign debt crisis period. It also examines the role of FDI, which though increasingly important in the flows of international production factors, is currently neglected by the literature. Preliminary results show that FDI has no direct effect on BC synchronization while international trade helps to synchronize BCs but only before the recent financial crisis (pre-2008) and only for the traditional EU countries.

Suggested Citation

  • Dimitrios Asteriou & Argiro Moudatsou, 2015. "Business Cycle Synchronization in the Enlarged EU: The Role of Bilateral Trade and FDI," Review of Development Economics, Wiley Blackwell, vol. 19(1), pages 196-207, February.
    • Handle: RePEc:bla:rdevec:v:19:y:2015:i:1:p:196-207
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    File URL: http://hdl.handle.net/10.1111/rode.12134
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    Cited by:

    1. Mariarosaria Comunale, 2017. "Synchronicity of real and financial cycles and structural characteristics in EU countries," CEIS Research Paper 414, Tor Vergata University, CEIS, revised 25 Sep 2017.
    2. Igor Velickovski & Aleksandar Stojkov & Ivana Rajkovic, 2017. "DIS Union of the Core and the Periphery," International Journal of Economics and Financial Issues, Econjournals, vol. 7(6), pages 159-174.
    3. Kinfack, Emilie & Bonga-Bonga, Lumengo, 2020. "Trade Linkages and Business Cycle Co-movement: Analysis of Trade between African Economies and their Main Trading partners," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(2), pages 275-306.
    4. Mariarosaria Comunale, 2020. "New synchronicity indices between real and financial cycles: Is there any link to structural characteristics and recessions in European Union countries?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(4), pages 617-641, October.
    5. Elena Kostenko & Vitaly Kostenko & Volodymyr Kuznichenko & Volodymyr Lapshyn, 2017. "International trade in Ukraine¡¯s regions during 2016 is analyzed. The taxonomy method is used to carry out a multidimensional analysis of the state of trade in all regions, with the goal of determini," Research in Applied Economics, Macrothink Institute, vol. 9(4), pages 64-74, December.

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