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The Convergence Of The Business Cycles In The Euro Area

Author

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  • Andrei Rădulescu

    (Romanian Academy)

Abstract

The Euro Area is confronted with the persistence of the sovereign debt crisis. The financial markets have frequently tested the resistance of the Euro Area, as the countries from the Southern part of the region face a tough macroeconomic adjustment process.The economic divergence is one of the factors that determined the current situation in the European Monetary Union. This divergence (nominal and real) was paid little attention by the financial markets and economists during the last years of the Great Moderation. However, the attitude changed when the Great Recession hit the region. This paper treats the behaviour of the business cycles of the Euro Area (12) member countries during the period 1996-2011. The convergence of the business cycles of the member countries of a currency union is one of the important criteria mentioned by the literature on Optimal Currency Areas. According to the results, the business cycles of the Euro Area (12) countries converged before the launch of the euro (1999) and diverged after 2004. The divergence intensified in the context of the global crisis.

Suggested Citation

  • Andrei Rădulescu, 2012. "The Convergence Of The Business Cycles In The Euro Area," Romanian Economic Business Review, Romanian-American University, vol. 7(4), pages 97-104, december.
    • Handle: RePEc:rau:journl:v:7:y:2012:i:4:p:97-104
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    References listed on IDEAS

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    1. Francesca D'Auria & Cécile Denis & Karel Havik & Kieran Mc Morrow & Christophe Planas & Rafal Raciborski & Werner Roger & Alessandro Rossi, 2010. "The production function methodology for calculating potential growth rates and output gaps," European Economy - Economic Papers 2008 - 2015 420, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Hein, Eckhard & Truger, Achim, 2005. "European Monetary Union: nominal convergence, real divergence and slow growth?," Structural Change and Economic Dynamics, Elsevier, vol. 16(1), pages 7-33, March.
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