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How hard is the euro area core? : an evaluation of growth cycles using wavelet analysis

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  • Crowley, Patrick M.
  • Maraun, Douglas
  • Mayes, David

Abstract

Using recent advances in time-varying spectral methods, this research analyses the growth cycles of the core of the euro area in terms of frequency content and phasing of cycles.The methodology uses the continuous wavelet transform (CWT) and also Hilbert wavelet pairs in the setting of a non-decimated discrete wavelet transform in order to analyse bivariate time series in terms of conventional frequency domain measures from spectral analysis.The findings are that coherence and phasing between the three core members of the euro area (France, Germany and Italy) have increased since the launch of the euro. Key words: time-varying spectral analysis, coherence, phase, business cycles, EMU, growth cycles, Hilbert transform, wavelet analysis JEL classification numbers: C19, C63, C65, E32, E39, E58, F40

Suggested Citation

  • Crowley, Patrick M. & Maraun, Douglas & Mayes, David, 2006. "How hard is the euro area core? : an evaluation of growth cycles using wavelet analysis," Research Discussion Papers 18/2006, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2006_018
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    References listed on IDEAS

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    1. Artis, Michael J & Zhang, Wenda, 1999. "Further Evidence on the International Business Cycle and the ERM: Is There a European Business Cycle?," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 120-132, January.
    2. Artis, Michael J & Zhang, W, 1997. "International Business Cycles and the ERM: Is There a European Business Cycle?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(1), pages 1-16, January.
    3. Kim Sangbae & In Francis Haeuck, 2003. "The Relationship Between Financial Variables and Real Economic Activity: Evidence From Spectral and Wavelet Analyses," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 7(4), pages 1-18, December.
    4. Daniel Levy & Hashem Dezhbakhsh, 2003. "On the typical spectral shape of an economic variable," Applied Economics Letters, Taylor & Francis Journals, vol. 10(7), pages 417-423.
    5. Kontolemis, Zenon G, 1997. "Does Growth Vary over the Business Cycle? Some Evidence from the G7 Countries," Economica, London School of Economics and Political Science, vol. 64(255), pages 441-460, August.
    6. Crowley, Patrick M., 2005. "An intuitive guide to wavelets for economists," Research Discussion Papers 1/2005, Bank of Finland.
    7. Levy, Daniel & Dezhbakhsh, Hashem, 2003. "International evidence on output fluctuation and shock persistence," Journal of Monetary Economics, Elsevier, vol. 50(7), pages 1499-1530, October.
    8. Crowley, Patrick M. & Lee, Jim, 2005. "Decomposing the co-movement of the business cycle : a time-frequency analysis of growth cycles in the euro area," Research Discussion Papers 12/2005, Bank of Finland.
    9. Andrew Hughes Hallett & Christian R. Richter, 2004. "Spectral Analysis as a Tool for Financial Policy: An Analysis of the Short-End of the British Term Structure," Computational Economics, Springer;Society for Computational Economics, vol. 23(3), pages 271-288, April.
    10. Camba-Méndez, Gonzalo & Kapetanios, George, 2001. "Spectral based methods to identify common trends and common cycles," Working Paper Series 0062, European Central Bank.
    11. Gençay, Ramazan & Gençay, Ramazan & Selçuk, Faruk & Whitcher, Brandon J., 2001. "An Introduction to Wavelets and Other Filtering Methods in Finance and Economics," Elsevier Monographs, Elsevier, edition 1, number 9780122796708.
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    Cited by:

    1. Joanna Bruzda, 2011. "Business cycle synchronization according to wavelets – the case of Poland and the euro zone member countries," Bank i Kredyt, Narodowy Bank Polski, vol. 42(3), pages 5-32.
    2. Luís Aguiar-Conraria & Manuel M. F. Martins & Maria Joana Soares, 2011. "Synchronization of Economic Sentiment Cycles in the Euro Area: a time-frequency analysis," CEF.UP Working Papers 1105, Universidade do Porto, Faculdade de Economia do Porto.
    3. David G. Mayes & Vesa Korhonen, 2006. "The CIS: Does the Regional Hegemony Facilitate Monetary Integration?," Economie Internationale, CEPII research center, issue 107, pages 173-196.
    4. Harald Schmidbauer & Angi Rösch & Erhan Uluceviz, 2012. "Connectedness Cycles in Equity Markets: A Wavelet Approach," EcoMod2012 4502, EcoMod.

    More about this item

    JEL classification:

    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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