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Business Cycle Synchronisation in a Currency Union: Taking Stock of the Evidence

Author

Listed:
  • Nauro F. Campos

    () (Brunel University London and ETH Zurich)

  • Jarko Fidrmuc

    () (ZU Friedrichshafen, CESifo Munich and KTU Kaunas)

  • Iikka Korhonen

    () (Bank of Finland)

Abstract

This paper offers a first systematic evaluation of the evidence on the effects of currency unions on the synchronisation of economic activity. Focusing on Europe, we construct a database of about 3,000 business cycles synchronisation coefficients and their design and estimation characteristics. We find that: (1) synchronisation increased from about 0.4 before the introduction of the euro in 1999 to 0.6 afterwards; (2) this increase occurred in both euro and non-euro countries (larger in former); (3) there is evidence of country-specific publication bias; (4) our differences-in-differences estimates suggest the euro accounted for approximately half of the observed increase in synchronisation.

Suggested Citation

  • Nauro F. Campos & Jarko Fidrmuc & Iikka Korhonen, 2017. "Business Cycle Synchronisation in a Currency Union: Taking Stock of the Evidence," GRU Working Paper Series GRU_2017_017, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
  • Handle: RePEc:cth:wpaper:gru_2017_017
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    References listed on IDEAS

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    Cited by:

    1. Plamen Nikolov & Paolo Pasimeni, 2019. "Fiscal Stabilization in the United States: Lessons for Monetary Unions," Economics Working Paper Archive wp_926, Levy Economics Institute.
    2. Sondermann, David & Consolo, Agostino & Gunnella, Vanessa & Koester, Gerrit & Lambrias, Kyriacos & Lopez-Garcia, Paloma & Nerlich, Carolin & Petroulakis, Filippos & Saiz, Lorena & Serafini, Roberta, 2019. "Economic structures 20 years into the euro," Occasional Paper Series 224, European Central Bank.
    3. repec:onb:oenbfi:y:2018:i:q3-18:b:4 is not listed on IDEAS

    More about this item

    Keywords

    business cycles synchronisation; optimum currency areas; EMU; euro; meta-analysis;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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