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Business cycle (de)synchronization in the aftermath of the global financial crisis: implications for the Euro area

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  • Bekiros Stelios

    ()

  • Nguyen Duc Khuong

    (IPAG Business School, 184 Boulevard Saint-Germain, 75006 Paris, France)

  • Uddin Gazi Salah
  • Sjö Bo

    (Linköping University, Department of Management and Engineering, SE-581 83 Linköping, Sweden)

Abstract

The introduction of Euro currency was a game-changing event intended to induce convergence of Eurozone business cycles on the basis of greater monetary and fiscal integration. The benefit of participating into a common currency area exceeds the cost of losing autonomy in national monetary policy only in case of cycle co-movement. However, synchronization was put back mainly due to country-specific differences and asymmetries in terms of trade and fiscal policies that became profound at the outset of the global financial crisis. As opposed to previous studies that are mostly based on linear correlation or causality modeling, we utilize the cross-wavelet coherence measure to detect and identify the scale-dependent time-varying (de)synchronization effects amongst Eurozone and the broad Euro area business cycles before and after the financial crisis. Our results suggest that the enforcement of an active monetary policy by the ECB during crisis periods could provide an effective stabilization instrument for the entire Euro area. However, as dynamic patterns in the lead-lag relationships of the European economies are revealed, (de)synchronization varies across different frequency bands and time horizons.

Suggested Citation

  • Bekiros Stelios & Nguyen Duc Khuong & Uddin Gazi Salah & Sjö Bo, 2015. "Business cycle (de)synchronization in the aftermath of the global financial crisis: implications for the Euro area," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 19(5), pages 609-624, December.
  • Handle: RePEc:bpj:sndecm:v:19:y:2015:i:5:p:609-624:n:5
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    Citations

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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. repec:eee:reveco:v:54:y:2018:i:c:p:74-102 is not listed on IDEAS
    3. repec:eee:ecmode:v:70:y:2018:i:c:p:301-309 is not listed on IDEAS
    4. Bekiros, Stelios & Nguyen, Duc Khuong & Uddin, Gazi Salah & Sjö, Bo, 2016. "On the time scale behavior of equity-commodity links: Implications for portfolio management," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 41(C), pages 30-46.
    5. repec:eee:ecmode:v:74:y:2018:i:c:p:124-141 is not listed on IDEAS
    6. repec:kap:openec:v:28:y:2017:i:5:d:10.1007_s11079-017-9465-9 is not listed on IDEAS
    7. repec:kap:rqfnac:v:51:y:2018:i:2:d:10.1007_s11156-017-0672-7 is not listed on IDEAS
    8. Ansgar Belke & Clemens Domnick & Daniel Gros, 2017. "Business Cycle Synchronization in the EMU: Core vs. Periphery," Open Economies Review, Springer, vol. 28(5), pages 863-892, November.
    9. repec:eee:phsmap:v:495:y:2018:i:c:p:30-39 is not listed on IDEAS
    10. repec:spr:empeco:v:55:y:2018:i:2:d:10.1007_s00181-017-1295-5 is not listed on IDEAS

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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