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Business Cycle Similarity Measuring in the Eurozone Member and Candidate Countries: an Alternative Approach

Author

Listed:
  • Petr Rozmahel

    () (Research Centre, Faculty of Business and Economics, Mendel University in Brno)

  • Nikola Najman

    () (Department of Economics, Faculty of Business and Economics, Mendel University in Brno)

Abstract

The article sheds some light on the process of measuring business cycle similarity and points out the fact that contemporary studies usually simplify this problem by measuring a simple correlation of cyclical development in GDP. The main goal is to assess the level of business cycle similarity in selected Eurozone member and candidate countries using the Concordance index. The Concordance index embodies an alternative and rarely used approach to measuring the similarity of business cycles. The article also includes a comparison of the Concordance index technique with traditional correlation methods. The results show that the Czech Republic belongs to the states with relatively high level of concordance comparing to the other Eurozone member and candidate countries. Accordingly, the measure of business cycle concordance should not serve as an argument for slowing down of the monetary integration process in the Czech Republic. The resultant concordance measures also give an evidence of relatively low level of the business cycle similarity of Slovak economy and the Eurozone, which might imply a possibly higher risk of the asymmetric shock occurrence in Slovakia.

Suggested Citation

  • Petr Rozmahel & Nikola Najman, 2011. "Business Cycle Similarity Measuring in the Eurozone Member and Candidate Countries: an Alternative Approach," MENDELU Working Papers in Business and Economics 2011-06, Mendel University in Brno, Faculty of Business and Economics.
  • Handle: RePEc:men:wpaper:06_2011
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    Keywords

    business cycle; concordance index; correlation analysis; optimum currency area;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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