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Are European business cycles close enough to be just one?

  • Maximo Camacho
  • Gabriel Perez-Quiros

We propose a comprehensive methodology to characterize the business cycle comovements across European economies and some industrialized countries, always trying to "leave the data speak". Out of this framework, we propose a novel method to show that there is no "Euro economy" that acts as an attractor to the other economies of the area. We show that the relative comovements across EU economies are prior to the establishment of the Monetary Union. We are able to explain an important proportion of the distances across their business cycles using macro-variables related to the structure of the economy, to the directions of trade, and to the size of the public sector. Finally, we show that the distances across countries that belong to the European Union are smaller than the distances across newcomers

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2004 with number 16.

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Date of creation: 11 Aug 2004
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Handle: RePEc:sce:scecf4:16
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