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Time Varying Cyclical Analysis for Economies in Transition

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  • Andrew Hughes Hallett
  • Christian R. Richter

Abstract

The identification of a possible European business cycle has been inconclusive and is complicated by the enlargement to the new member states and their transition to market economies. This paper shows how to decompose a business cycle into a time-frequency framework in a way that allows us to accommodate structural breaks and nonstationary variables. To illustrate, calculations of the growth rate spectrum and coherences for the Hungarian, Polish, German and French economies show the instability of the transition period. However, since then there has been convergence on the Eurozone economy at short cycle lengths, but little convergence in long cycles. We argue that this shows evidence of nominal convergence, but little real convergence. The Maastricht criteria for membership of the Euro therefore need to be adapted to test for real convergence.

Suggested Citation

  • Andrew Hughes Hallett & Christian R. Richter, 2007. "Time Varying Cyclical Analysis for Economies in Transition," CASE Network Studies and Analyses 0334, CASE-Center for Social and Economic Research.
  • Handle: RePEc:sec:cnstan:0334
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    3. Joanna Bruzda, 2011. "Business cycle synchronization according to wavelets – the case of Poland and the euro zone member countries," Bank i Kredyt, Narodowy Bank Polski, vol. 42(3), pages 5-32.
    4. repec:prg:jnlpep:v:2015:y:2015:i:5:id:512:p:1-18 is not listed on IDEAS

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    More about this item

    Keywords

    Time-Frequency Analysis; Coherence; Growth Rates; Business Cycle;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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