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The Endogeneity of Optimum Currency Areas Criteria in the Context of Financial Crisis: Evidence from Time-Frequency Domain Analysis

Author

Listed:
  • Svatopluk Kapounek

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

  • Jitka Pomenkova

    (Department of Radio Electronics, Faculty of Electrical Engineering and Communication, Brno University of Technology)

Abstract

The European integration process is theoretically supported by optimum currency area (OCA) theory which originates from debates about fixed versus flexible exchange rates, treating a common currency as the extreme case of a fixed exchange rate. The key issues of theoretical and empirical discussions in recent years are costs and benefits of adopting a common currency. We follow the hypothesis that historically greater integration provides more highly synchronized cycles. However, the commonly used methodological approaches overestimate cyclical co-movements between the time series during the financial crisis. Our contribution is in time series decomposition elimination trend included outliers appears in the years 2007-2010.

Suggested Citation

  • Svatopluk Kapounek & Jitka Pomenkova, 2012. "The Endogeneity of Optimum Currency Areas Criteria in the Context of Financial Crisis: Evidence from Time-Frequency Domain Analysis," MENDELU Working Papers in Business and Economics 2012-31, Mendel University in Brno, Faculty of Business and Economics.
    • Handle: RePEc:men:wpaper:31_2012
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    References listed on IDEAS

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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