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A new approach to analyzing convergence and synchronicity in growth and business cycles : Cross recurrence plots and quantification analysis

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  • Crowley, Patrick M.
  • Schultz, Aaron

Abstract

Convergence and synchronisation of business and growth cycles are important issues in the efficient formulation of euro area economic policies, and in particular European Central Bank (ECB) monetary policy. Although several studies in the economics literature address the issue of synchronicity of growth within the euro area, this is the first to address the issue using cross recurrence analysis. The main findings are that member state growth rates had largely converged before the introduction of the euro, but there is a wide degree of different synchronisation behaviours which appear to be non-linear in nature. Many of the euro area member states display what is termed here intermittency in synchronization, although this is not consistent across countries or members of the euro area. These differences in synchronization behaviors could introduce further challenges in managing the country-specific effects of the common monetary policy in the euro area. Keywords: Euro area, business cycles, growth cycles, recurrence plots, nonstationarity, complex systems, surrogate analysis. JEL classification numbers: C65, E32, F15 Note: A previous shortened version of the second part of this paper was previously published as Crowley (2008).

Suggested Citation

  • Crowley, Patrick M. & Schultz, Aaron, 2010. "A new approach to analyzing convergence and synchronicity in growth and business cycles : Cross recurrence plots and quantification analysis," Research Discussion Papers 16/2010, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2010_016
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    References listed on IDEAS

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    1. 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.
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    JEL classification:

    • 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
    • F15 - International Economics - - Trade - - - Economic Integration

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