The Endogeneity of Optimum Currency Areas Criteria in the Context of Financial Crisis: Evidence from Time-Frequency Domain Analysis

Svatopluk Kapounek and Jitka Poměnková

No 2012-31, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: The European integration process is theoretically supported by optimum currency area (OCA) theory which originates from debates about fixed versus flexible exchange rates, treating a common currency as the extreme case of a fixed exchange rate. The key issues of theoretical and empirical discussions in recent years are costs and benefits of adopting a common currency. We follow the hypothesis that historically greater integration provides more highly synchronized cycles. However, the commonly used methodological approaches overestimate cyclical co-movements between the time series during the financial crisis. Our contribution is in time series decomposition elimination trend included outliers appears in the years 2007-2010.

Keywords: singular value decomposition; wavelet analysis; synchronization; euro area. (search for similar items in EconPapers)
JEL-codes: C14 F15 (search for similar items in EconPapers)
Pages: 11
Date: 2012-10
New Economics Papers: this item is included in nep-eec and nep-mon
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The endogeneity of optimum currency area criteria in the context of financial crisis: Evidence from the time-frequency domain analysis (2013)
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