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Correlation of business cycles in the euro zone

Author

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  • Gonçalves, Carlos Eduardo S.
  • Rodrigues, Mauro
  • Soares, Tiago

Abstract

In this short article we use a simple differences-in-differences technique to investigate whether bilateral correlation of business cycles increased more amongst members of the European Monetary Union (EMU) after the implementation of the Euro than amidst other OECD economies. We present evidence suggesting this to be the case.

Suggested Citation

  • Gonçalves, Carlos Eduardo S. & Rodrigues, Mauro & Soares, Tiago, 2009. "Correlation of business cycles in the euro zone," Economics Letters, Elsevier, vol. 102(1), pages 56-58, January.
    • Handle: RePEc:eee:ecolet:v:102:y:2009:i:1:p:56-58
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    References listed on IDEAS

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    1. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
    2. Kenneth Rogoff, 2001. "Why Not a Global Currency?," American Economic Review, American Economic Association, vol. 91(2), pages 243-247, May.
    3. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-1357, September.
    4. Eichengreen, Barry, 1990. "Is Europe an Optimum Currency Area?," CEPR Discussion Papers 478, C.E.P.R. Discussion Papers.
    5. Baxter, Marianne & Kouparitsas, Michael A., 2005. "Determinants of business cycle comovement: a robust analysis," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 113-157, January.
    6. Baldwin, Richard E., 2006. "The euro's trade effects," Working Paper Series 594, European Central Bank.
    7. repec:oup:ecpoli:v:15:y:2000:i:30:p:7-46 is not listed on IDEAS
    8. Clark, Todd E. & van Wincoop, Eric, 2001. "Borders and business cycles," Journal of International Economics, Elsevier, vol. 55(1), pages 59-85, October.
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    Citations

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    Cited by:

    1. Lee, Jim, 2012. "Measuring business cycle comovements in Europe: Evidence from a dynamic factor model with time-varying parameters," Economics Letters, Elsevier, vol. 115(3), pages 438-440.
    2. Agénor, Pierre-Richard & Aizenman, Joshua, 2011. "Capital market imperfections and the theory of optimum currency areas," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1659-1675.
    3. Maria Jesús Delgado-Rodriguez & Sonia De lucas-Santos, 2013. "Testing cyclical convergence with the factor model in the Euro Area," Economics Bulletin, AccessEcon, vol. 33(3), pages 2245-2250.
    4. Bruzda, Joanna, 2011. "On some problems in discrete wavelet analysis of bivariate spectra with an application to business cycle synchronization in the euro zone," Economics Discussion Papers 2011-5, Kiel Institute for the World Economy (IfW).
    5. Smimou, K. & Khallouli, W., 2015. "Does the Euro affect the dynamic relation between stock market liquidity and the business cycle?," Emerging Markets Review, Elsevier, vol. 25(C), pages 125-153.
    6. Ogrokhina, Olena, 2019. "Persistence of prices in the Eurozone capital cities: Evidence from the Economist Intelligence Unit City Data," Economic Modelling, Elsevier, vol. 76(C), pages 330-338.
    7. Bierbaumer-Polly, Jürgen & Huber, Peter & Huber, Petr, 2015. "The Impact of EU-Accession on Regional Business Cycle Synchronization and Sector Specialization," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113154, Verein für Socialpolitik / German Economic Association.
    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. Kurach, Radoslaw, 2011. "Eurozone stock returns co-movement:: Some findings for portfolio managers and central bankers," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 5(2), pages 1-12, January.
    10. Hoang Sang Nguyen & Fabien Rondeau, 2019. "The transmission of business cycles: Lessons from the 2004 enlargement of the EU and the adoption of the euro," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 27(3), pages 729-743, July.
    11. Gächter, Martin & Riedl, Aleksandra, 2014. "One money, one cycle? The EMU experience," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 141-155.
    12. Lee, Jim, 2009. "Evaluating monetary policy of the euro area with cross-country heterogeneity: Evidence from a New Keynesian model," Economic Systems, Elsevier, vol. 33(4), pages 325-343, December.
    13. Lee, Eun-Joo, 2017. "Intra- and inter-regional portfolio diversification strategies under regional market integration: Evidence from U.S. global banks," International Review of Financial Analysis, Elsevier, vol. 54(C), pages 1-22.
    14. Radoslaw Kurach, 2011. "Eurozone stock returns co-movement: Some findings for portfolio managers and central bankers," Business and Economic Horizons (BEH), Prague Development Center, vol. 5(2), pages 1-12, April.
    15. Styliani Christodoulopoulou, 2014. "The effect of currency unions on business cycle correlations: the EMU case," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(2), pages 177-222, May.
    16. 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.

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