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How Similar Are European Business Cycles?

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Abstract

In this paper, we focus on how European economic integration has affected the synchronization and the magnitude of business cycles among participating countries. We measure, based on bandpass filtered data, the characteristics of European business cycles analyzing to what extent they have become more similar over time. We also consider the role of other factors such as differences in fiscal and monetary policy, border effects, and trade intensity. Our main finding is that European business cycles are highly synchronized, although we also find that synchronization was higher during periods with highly flexible exchange rates. In addition we find a positive tradeoff between timing and magnitude such that more synchronization coincides with larger relative magnitude. These results raise concern about the consequences of a common monetary policy within EMU.

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  • Bergman, Michael, 2004. "How Similar Are European Business Cycles?," Working Papers 2004:9, Lund University, Department of Economics.
  • Handle: RePEc:hhs:lunewp:2004_009
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    Cited by:

    1. Eickmeier, Sandra, 2006. "Comovements and heterogeneity in the Comovements and heterogeneity in the dynamic factor model," Discussion Paper Series 1: Economic Studies 2006,31, Deutsche Bundesbank.
    2. Camacho, Maximo & Perez-Quiros, Gabriel & Saiz, Lorena, 2008. "Do European business cycles look like one?," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2165-2190, July.
    3. Jacques Pelkmans & Lourdes Acedo Montoya & Alessandro Maravalle, 2008. "How product market reforms lubricate shock adjustment in the euro area," European Economy - Economic Papers 2008 - 2015 341, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Inklaar, Robert & Jong-A-Pin, Richard & de Haan, Jakob, 2008. "Trade and business cycle synchronization in OECD countries--A re-examination," European Economic Review, Elsevier, vol. 52(4), pages 646-666, May.
    5. Dapontas Dimitrios & Evangelopoulos Panagiotis, 2013. "Has the NAFTA Foundation Affected Business Cycles Length? An Introduction," Scientific Annals of Economics and Business, Sciendo, vol. 60(1), pages 145-153, July.
    6. Saša Obradović & Vladimir Mihajlović, 2013. "Synchronization of Business Cycles in the Selected European Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 759-773, December.
    7. Yasuyuki Komaki & Nobuo Iizuka, 2010. "Some aspects of the OECD business cycle - The effects of EMU -," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(2), pages 199-236, March.
    8. Erkan Erdil & Y?lmaz Akdi, 2019. "Customs Union Effect in International Trade: Turkish Case," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 7(2), pages 43-58, November.
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    10. Everts, Martin, 2006. "Sectoral and Industrial Business Cycles," MPRA Paper 1176, University Library of Munich, Germany.
    11. Jakob De Haan & Robert Inklaar & Richard Jong‐A‐Pin, 2008. "Will Business Cycles In The Euro Area Converge? A Critical Survey Of Empirical Research," Journal of Economic Surveys, Wiley Blackwell, vol. 22(2), pages 234-273, April.
    12. Hasan Engin Duran, 2015. "Dynamics of Business Cycle Synchronization in Turkey," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(5), pages 581-606, December.
    13. Hasan Engin Duran, 2015. "Dynamics of Business Cycle Synchronization within Turkey," Working Papers 2015/01, Turkish Economic Association.
    14. Janiga-Ćmiel Anna, 2016. "An Analysis of Conditional Dependencies of Covariance Matrices for Economic Processes in Selected EU Countries," Folia Oeconomica Stetinensia, Sciendo, vol. 16(2), pages 119-134, December.
    15. Pytlarczyk, Ernest, 2005. "An estimated DSGE model for the German economy within the euro area," Discussion Paper Series 1: Economic Studies 2005,33, Deutsche Bundesbank.
    16. Papageorgiou, Theofanis & Michaelides, Panayotis G. & Milios, John G., 2010. "Business cycles synchronization and clustering in Europe (1960-2009)," Journal of Economics and Business, Elsevier, vol. 62(5), pages 419-470, September.
    17. Athina Zervoyianni & Athanasios Anastasiou, 2009. "Convergence of shocks and trade in the enlarged European Union," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 18(1), pages 79-114.
    18. Luigi Bocola, 2006. "Trade and Business-Cycle Comovement: Evidence from the EU," Rivista di Politica Economica, SIPI Spa, vol. 96(6), pages 25-62, November-.
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    More about this item

    Keywords

    Business cycles; symmetry and co-movement of cycles; magnitude of cycles; economic integration; monetary union;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F15 - International Economics - - Trade - - - Economic Integration

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