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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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    File URL: https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%20%232017-017%20Campos%20Fidrmuc%20Korhonen.pdf
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    Cited by:

    1. is not listed on IDEAS
    2. Plamen Nikolov & Paolo Pasimeni, 2023. "Fiscal Stabilization in the United States: Lessons for Monetary Unions," Open Economies Review, Springer, vol. 34(1), pages 113-153, February.
    3. Bahoo, Salman & Alon, Ilan & Paltrinieri, Andrea, 2020. "Sovereign wealth funds: Past, present and future," International Review of Financial Analysis, Elsevier, vol. 67(C).
    4. Ngozi E. Egbuna & Maimuna John-Sowe & Santigie M. Kargbo (PhD) & Sani Bawa (PhD) & Ibrahima Diallo & Isatou Mendy, 2020. "Business Cycle Synchronisation In The Ecowas Region," Working Papers 18, West African Monetary Institute.
    5. Chrysostomos Stoforos & Stavros Degiannakis & Panagiotis Delis & George Filis & Theodosios Palaskas, 2024. "Business Cycles Synchronization: Literature Review," Journal of Economic Analysis, Anser Press, vol. 3(4), pages 222-249, December.
    6. Peter Dreuw, 2023. "Structural time series models and synthetic controls—assessing the impact of the euro adoption," Empirical Economics, Springer, vol. 64(2), pages 681-725, February.
    7. Guillermo Peña, 2025. "Adopting the euro does not work without political integration," International Economics and Economic Policy, Springer, vol. 22(2), pages 1-21, May.

    More about this item

    Keywords

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    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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