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Regional business cycles across europe

Author

Listed:
  • Eduardo Bandrés

    () (UNIVERSITY OF ZARAGOZA AND FUNCAS)

  • María Dolores Gadea-Rivas

    () (UNIVERSITY OF ZARAGOZA)

  • Ana Gómez-Loscos

    () (Banco de España)

Abstract

Large contractionary shocks such as the Great Recession or the sovereign debt crisis in Europe have rekindled interest in analyzing the overall patterns of business cycles. We study these patterns for Europe both at the national and the regional level. We first examine business cycles’ comovements and then, using Finite Mixture Markov Models, we obtain a dating of the different business cycles and identify clusters among them. We also propose an index to analyze within-country homogeneity. Our main findings are the following: (i) we find evidence of just one cluster amongst the European countries while, at the regional level, there is more heterogeneity and we identify five different groups of European regions; (ii) the groups are characterized as follows: the first contains most of the Greek regions; groups two and three include, in most cases, regions from Germany (plus a couple of regions from southern European countries in group two and some regions of the core countries in group three); group four is populated mainly by regions belonging to northern European countries; and group five is the largest and is composed of the rest of European regions; (iii) we notice that the degree of homogeneity of regional business cycles within countries is quite different; (iv) we also observe that spatial correlation increased during the convergence process towards the introduction of the euro and has taken a big leap with the Great Recession, both at country and regional level. In fact, comovements among regions have mainly increased during the last decade. These results have important implications for policymakers in the design of convergence policies at the European level and also in the design of fiscal policies to reduce regional disparities at the country level.

Suggested Citation

  • Eduardo Bandrés & María Dolores Gadea-Rivas & Ana Gómez-Loscos, 2017. "Regional business cycles across europe," Occasional Papers 1702, Banco de España;Occasional Papers Homepage.
  • Handle: RePEc:bde:opaper:1702
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    Cited by:

    1. María Dolores Gadea-Rivas & Ana Gómez-Loscos & Eduardo Bandrés, 2019. "Ciclos económicos y clusters regionales en Europa," Occasional Papers 1914, Banco de España;Occasional Papers Homepage.
    2. Kapounek, Svatopluk & Kučerová, Zuzana, 2019. "Historical decoupling in the EU: Evidence from time-frequency analysis," International Review of Economics & Finance, Elsevier, vol. 60(C), pages 265-280.
    3. Maria Gadea & Ana Gómez-Loscos & Antonio Montañés, 2012. "Cycles inside cycles: Spanish regional aggregation," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 3(4), pages 423-456, December.
    4. Concha Artola & María Gil & Javier J. Pérez & Alberto Urtasun & Alejandro Fiorito & Diego Vila, 2018. "Monitoring the Spanish economy from a regional perspective: main elements of analysis," Occasional Papers 1809, Banco de España;Occasional Papers Homepage.
    5. Gomez-Loscos, Ana & Gadea, M. Dolores & Bandres, Eduardo, 2018. "Business cycle patterns in European regions," MPRA Paper 83964, University Library of Munich, Germany.
    6. Camacho, Máximo & Pacce, Matias & Ulloa, Camilo, 2018. "Regional Business Cycle Phases in Spain/Ciclos económicos regionales en España," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 36, pages 857-896, Septiembr.
    7. Katerina Arnostova & Tomas Adam & Oxana Babecka Kucharcukova & Jan Babecky & Vojtech Belling & Sona Benecka & Jan Bruha & Martin Gurtler & Tibor Hledik & Tomas Holub & Eva Hromadkova & Lubos Komarek &, 2017. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2017," Occasional Publications - Edited Volumes, Czech National Bank, number as17 edited by Katerina Arnostova & Lucie Matejkova, March.
    8. Maximo Camacho & Matias Pacce & Camilo Ulloa, 2017. "Business cycle phases in Spain," Working Papers 17/20, BBVA Bank, Economic Research Department.
    9. Gadea-Rivas, María Dolores & Gómez-Loscos, Ana & Leiva-Leon, Danilo, 2019. "Increasing linkages among European regions. The role of sectoral composition," Economic Modelling, Elsevier, vol. 80(C), pages 222-243.
    10. María Dolores Gadea-Rivas & Ana Gómez-Loscos & Danilo Leiva-Leon, 2017. "The evolution of regional economic interlinkages in Europe," Working Papers 1705, Banco de España;Working Papers Homepage.

    More about this item

    Keywords

    business cycles; clusters; regions; finite mixtures Markov models;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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