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

  • 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)

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. Classification-JEL: F15, C14

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Paper provided by Mendel University in Brno, Faculty of Business and Economics in its series MENDELU Working Papers in Business and Economics with number 2012-31.

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Length: 11
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:men:wpaper:31_2012
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  1. Jarko Fidrmuc & Iikka Korhonen, 2009. "The Impact of the Global Financial Crisis on Business Cycles in Asian Emerging Economies," CESifo Working Paper Series 2710, CESifo Group Munich.
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  11. Rua, António, 2010. "Measuring comovement in the time-frequency space," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 685-691, June.
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  13. Lionel Fontagné & Michael Freudenberg, 1999. "Endogenous Symmetry of Shocks in a Monetary Union," Open Economies Review, Springer, vol. 10(3), pages 263-287, July.
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  15. Degiannakis, Stavros & Duffy, David & Filis, George, 2013. "Time-varying Business Cycles Synchronisation in Europe," MPRA Paper 52925, University Library of Munich, Germany.
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