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Business Cycle Correlation of the New Meber States with Eurozone - The Case of Romania

  • Dumitru, Ionut


    (Academy of the Economic Studies of Bucharest; Raiffeisen Bank Romania)

  • Dumitru, Ionela


    (Academy of the Economic Studies Bucharest)

This paper assesses the degree of readiness of New Member States (NMS) of the EU, including Romania, to adopt euro, mainly based on an optimal currency area (OCA) criterium. Using three consensus measures of output gap based on revisions of the estimated output gaps computed by 5 filtering techniques and a benchmark method based on Principal Component Analysis (PCA) we estimated the business cycle correlation between NMS and eurozone. Our findings suggest that the correlation of the business cycle in the case of Romania is one of the lowest among NMS, although it increased tremendously in the last years. The main conclusion of our paper is the fact that Romania, as well as some other NMS countries still need time to progress on the real convergence criteria in order to adopt euro without major costs.

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Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2010)
Issue (Month): 4 (December)
Pages: 16-31

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Handle: RePEc:rjr:romjef:v::y:2010:i:4:p:16-31
Contact details of provider: Postal: Casa Academiei, Calea 13, Septembrie nr.13, sector 5, Bucureşti 761172
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  1. Don Harding & Adrian Pagan, 2000. "Disecting the Cycle: A Methodological Investigation," Econometric Society World Congress 2000 Contributed Papers 1164, Econometric Society.
  2. Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 475-512, May.
  3. Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers.
  4. Iancu, Aurel, 2007. "Economic Convergence. Applications - Second Part -," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 4(4), pages 24-48, December.
  5. Harding, Don & Pagan, Adrian, 2001. "Extracting, Using and Analysing Cyclical Information," MPRA Paper 15, University Library of Munich, Germany.
  6. Zsolt Darvas & Gabor Vadas, 2005. "A New Method for Combining Detrending Techniques with Application to Business Cycle Synchronization of the New EU Members," MNB Working Papers 2005/05, Magyar Nemzeti Bank (Central Bank of Hungary).
  7. Adrian Pagan & Don Harding, 2005. "A suggested framework for classifying the modes of cycle research," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 151-159.
  8. Dobrescu, Emilian, 2007. "Modelling The Romanian Economy: Some Data Problems," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 4(1), pages 7-25, March.
  9. Don Harding & Adrian Pagan, 2006. "Measurement of Business Cycles," Department of Economics - Working Papers Series 966, The University of Melbourne.
  10. Jarko Fidrmuc & Iikka Korhonen, 2006. "Meta-Analysis of the Business Cycle Correlation between the Euro Area and the CEECs," CESifo Working Paper Series 1693, CESifo Group Munich.
  11. Fleming, J Marcus, 1971. "On Exchange Rate Unification," Economic Journal, Royal Economic Society, vol. 81(323), pages 467-88, September.
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