Estimating The Business Cycle Synchronization Between Romania And The Euro Area

The conditions of the well-functioning of a monetary union were defined by the optimum currency area theory. From this perspective, the business cycles synchronization outlined itself as a meta-condition for the benefits of sharing a common currency to surpass its costs. The synchronization between the economies of the countries that have recently joined the EU and the one of the Euro area has proved itself of maximum importance given, on the one hand, these countries’ objective to adopt the common European currency, but also the obvious crystallization, in the present EU crisis, of the strong economies within the EMU, the evolution of which could dictate the economic perspective of the other economies (outside EMU) linked to them. Thus, our analysis focuses on the estimation of the business cycle synchronization between Romania, as a new member state, and the euro area as a whole, but also between Romania and each member taken individually. For the estimation, we have used both parametric and non-parametric correlation methods. For comparison reasons, the analysis vis-a-vis the Euro area as a whole was also expanded to the other new member states that haven’t adopted the euro yet.