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Time Varying Cyclical Analysis for Economies in Transition

  • Andrew Hughes Hallett
  • Christian R. Richter

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.

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Paper provided by CASE-Center for Social and Economic Research in its series CASE Network Studies and Analyses with number 0334.

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Length: 21 Pages
Date of creation: 2007
Date of revision:
Handle: RePEc:sec:cnstan:0334
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