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How hard is the euro area core? An evaluation of growth cycles using wavelet analysis

Author

Listed:
  • Crowley, Patrick M.
  • Maraun, Douglas
  • Mayes, David

Abstract

Using recent advances in time-varying spectral methods, this research analyses the growth cycles of the core of the euro area in terms of frequency content and phasing of cycles.The methodology uses the continuous wavelet transform (CWT) and also Hilbert wavelet pairs in the setting of a non-decimated discrete wavelet transform in order to analyse bivariate time series in terms of conventional frequency domain measures from spectral analysis.The findings are that coherence and phasing between the three core members of the euro area (France, Germany and Italy) have increased since the launch of the euro.

Suggested Citation

  • Crowley, Patrick M. & Maraun, Douglas & Mayes, David, 2006. "How hard is the euro area core? An evaluation of growth cycles using wavelet analysis," Bank of Finland Research Discussion Papers 18/2006, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2006_018
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    References listed on IDEAS

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    1. Camba-Méndez, Gonzalo & Kapetanios, George, 2001. "Spectral based methods to identify common trends and common cycles," Working Paper Series 62, European Central Bank.
    2. Levy, Daniel & Dezhbakhsh, Hashem, 2003. "International Evidence on Output Fluctuation and Shock Persistence," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 50(7), pages 1499-1530.
    3. Artis, Michael J & Zhang, Wenda, 1999. "Further Evidence on the International Business Cycle and the ERM: Is There a European Business Cycle?," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 120-132, January.
    4. M. B. Priestley, 1996. "Wavelets And Time‐Dependent Spectral Analysis," Journal of Time Series Analysis, Wiley Blackwell, vol. 17(1), pages 85-103, January.
    5. Crowley, Patrick M., 2005. "An intuitive guide to wavelets for economists," Bank of Finland Research Discussion Papers 1/2005, Bank of Finland.
    6. Levy, Daniel & Dezhbakhsh, Hashem, 2003. "On the Typical Spectral Shape of an Economic Variable," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 10(7), pages 417-423.
    7. Gençay, Ramazan & Gençay, Ramazan & Selçuk, Faruk & Whitcher, Brandon J., 2001. "An Introduction to Wavelets and Other Filtering Methods in Finance and Economics," Elsevier Monographs, Elsevier, edition 1, number 9780122796708.
    8. Artis, Michael J & Zhang, W, 1997. "International Business Cycles and the ERM: Is There a European Business Cycle?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(1), pages 1-16, January.
    9. Kim Sangbae & In Francis Haeuck, 2003. "The Relationship Between Financial Variables and Real Economic Activity: Evidence From Spectral and Wavelet Analyses," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 7(4), pages 1-18, December.
    10. Crowley, Patrick M. & Lee, Jim, 2005. "Decomposing the co-movement of the business cycle : a time-frequency analysis of growth cycles in the euro area," Research Discussion Papers 12/2005, Bank of Finland.
    11. Andrew Hughes Hallett & Christian R. Richter, 2004. "Spectral Analysis as a Tool for Financial Policy: An Analysis of the Short-End of the British Term Structure," Computational Economics, Springer;Society for Computational Economics, vol. 23(3), pages 271-288, April.
    12. Patrick Crowley & Jim Lee, 2005. "Decomposing the co-movement of the business cycle: a time- frequency analysis of growth cycles in the eurozone," Macroeconomics 0503015, University Library of Munich, Germany.
    13. Patrick Crowley, 2005. "An intuitive guide to wavelets for economists," Econometrics 0503017, University Library of Munich, Germany.
    14. Crowley, Patrick M. & Lee, Jim, 2005. "Decomposing the co-movement of the business cycle: a time-frequency analysis of growth cycles in the euro area," Bank of Finland Research Discussion Papers 12/2005, Bank of Finland.
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    Cited by:

    1. David G. Mayes & Vesa Korhonen, 2006. "The CIS: Does the Regional Hegemony Facilitate Monetary Integration?," Economie Internationale, CEPII research center, issue 107, pages 173-196.

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    JEL classification:

    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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