Business Cycle Synchronization and the Euro: a Wavelet Analysis

Luís Francisco Aguiar () and Maria Joana Soares ()
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Luís Francisco Aguiar: Universidade do Minho - NIPE, http://www.eeg.uminho.pt
Maria Joana Soares: Universidade do Minho

No 36/2010, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: We use wavelet analysis to study cycle synchronization across the EU-15 and the Euro-12 countries. Based on the wavelet transform, we propose a metric to measure and test for business cycles synchronization. Several conclusions emerge. France and Germany form the core of the Euro land, being the most synchronized countries with the rest of Europe. Portugal, Greece, Ireland and Finland do not show statistically relevant degrees of synchronization with Europe. We also show that some countries (like Spain) have a French accent, while others have a German accent (e.g. Austria). Perhaps surprisingly, we find that the French business cycle has been leading the German business cycle as well as the rest of Europe. Among the countries that may, in the future, join the Euro, the Czech Republic seems the most promising candidate.

Keywords: Business cycle synchronization; European Union integration; Continuous wavelet transform; Wavelet distance matrix; Multidimensional scaling (search for similar items in EconPapers)
JEL-codes: E32 C22 F02 F15 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-eec, nep-mac and nep-opm
Date: 2010
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