Comparing Shocks and Frictions in US and Euro Area Business Cycles: A Bayesian DSGE Approach

Export specialisation and output synchronisation in the euro area: The case of Southern countries

Acta Oeconomica ◽

10.1556/032.2016.66.4.3 ◽

2016 ◽

Vol 66 (4) ◽

pp. 617-637

Author(s):

Sofia Helena Gouveia

Keyword(s):

Business Cycles ◽

Euro Area ◽

Successful Implementation ◽

European Monetary ◽

Member States ◽

Sectoral Structure ◽

Optimum Currency ◽

Southern European Countries ◽

Of Greece

Business cycle synchronisation and the similarity in the sectoral structure of exports are key conditions for the successful implementation of common monetary policy, as shown by the theory of Optimum Currency Areas. This paper examines the degree of correlation between the aggregate euro area and 12 member states’ business cycles and the role of their exports specialisation dynamics vis-à-vis the euro area over the period 1981–2012, focusing in particular on Southern European countries. Overall, we find that since the inception of the European Monetary Union, the business cycles of euro area member states have been increasingly synchronised with the aggregate euro area cycle, with the exception of Greece. We also document that changes in the Greek, Portuguese, and Spanish export structures brought these countries closer to the euro area structure as a whole. Furthermore, we find a positive and significant relationship between the similarity of export structures and GDP cyclical correlations.

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Business cycle (de)synchronization in the aftermath of the global financial crisis: implications for the Euro area

Studies in Nonlinear Dynamics & Econometrics ◽

10.1515/snde-2014-0055 ◽

2015 ◽

Vol 19 (5) ◽

Cited By ~ 6

Author(s):

Stelios Bekiros ◽

Duc Khuong Nguyen ◽

Gazi Salah Uddin ◽

Bo Sjö

Keyword(s):

Monetary Policy ◽

Financial Crisis ◽

Business Cycles ◽

Euro Area ◽

Global Financial Crisis ◽

Wavelet Coherence ◽

Before And After ◽

The Global Financial Crisis ◽

The Cost ◽

European Economies

AbstractThe introduction of Euro currency was a game-changing event intended to induce convergence of Eurozone business cycles on the basis of greater monetary and fiscal integration. The benefit of participating into a common currency area exceeds the cost of losing autonomy in national monetary policy only in case of cycle co-movement. However, synchronization was put back mainly due to country-specific differences and asymmetries in terms of trade and fiscal policies that became profound at the outset of the global financial crisis. As opposed to previous studies that are mostly based on linear correlation or causality modeling, we utilize the cross-wavelet coherence measure to detect and identify the scale-dependent time-varying (de)synchronization effects amongst Eurozone and the broad Euro area business cycles before and after the financial crisis. Our results suggest that the enforcement of an active monetary policy by the ECB during crisis periods could provide an effective stabilization instrument for the entire Euro area. However, as dynamic patterns in the lead-lag relationships of the European economies are revealed, (de)synchronization varies across different frequency bands and time horizons.

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Synchronization of business cycles in the selected European countries

Panoeconomicus ◽

10.2298/pan1306759o ◽

2013 ◽

Vol 60 (6) ◽

pp. 759-773 ◽

Cited By ~ 2

Author(s):

Sasa Obradovic ◽

Vladimir Mihajlovic

Keyword(s):

Business Cycles ◽

Foreign Trade ◽

Correlation Coefficient ◽

Euro Area ◽

Pearson Correlation ◽

Rank Correlation ◽

Optimum Currency Area ◽

Trade Volume ◽

Currency Area ◽

Optimum Currency

The synchronization of business cycles represents one of the conditions that countries have to fulfil to become part of an optimum currency area, as well as a condition for the efficient implementation of a common economic policy in these countries. This paper examines the extent to which Serbia and its neighbouring countries fulfil these conditions, taking the euro area as an optimum currency area. By applying the Hodrick-Prescott and the band-pass filters, as well as the Pearson correlation coefficient and the Spearman rank correlation coefficient, this paper examines the synchronization of business cycles in these countries. Taking Serbia as an example, the influence of the foreign trade volume between two countries on the similarity of their business cycles is tested. The results show a lower harmonization of business cycles in Serbia with those in the euro area, when compared with the selected neighbouring countries, and do not confirm the thesis on the influence of the foreign trade volume on the harmonization of business cycles.

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