Business Cycle Convergence: A Survey of Methods and Models

This survey provides an up-to-date summary of the literature that relates to the study of business cycle synchronization. Various paths have been followed through time in empirically testing business cycle co-movement and different data sets have been explored so that to date consensus still dissolves. These studies fall into two major categories: those dealing with the existence of business cycle convergence and the ones trying to identify the macroeconomic variables that induce the co-movement patterns. With respect to the first category and despite the varying empirical results, the majority of studies present evidence in favor of macroeconomic convergence in certain country groups, e.g., the members of the EMU and the US states. Regarding the second category of studies, most authors provide evidence that designates the intensity of trade as a robust factor that induces convergence. We classify the literature into groups depending on the methodology followed in order to provide to the reader a consistent and comprehensive guide. Moreover, we contribute to the existing literature by presenting a novel methodology for analyzing business cycle convergence patterns using tools from Graph Theory and the Minimum Dominating Set technique.