The euro goes East. Implications of the 2000-2002 economic slowdown for synchronisation of business cycles between the euro area and CEEs

Iikka Korhonen and Jarko Fidrmuc ()

Macroeconomics from EconWPA

Abstract: We assess the correlation of supply and demand shocks between current countries in the euro area and EU accession candidates from 1993/1995 to 2002. Supply and demand shocks are recovered from estimated structural VAR models of output growth and inflation. Notably, the economic slowdown between 2000 and 2002 increased heterogeneity of business cycles between the euro area and acceding counties. We find that several acceding countries have a quite high correlation of underlying shocks with the euro area and conclude that continuing integration within the EU is likely to align the business cycles of these countries in a manner similar to the synchronisation of supply and demand shocks we document for the EU in the 1990s.

Keywords: Optimum currency area; EU enlargement; structural VAR (search for similar items in EconPapers)
JEL-codes: E32 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-ifn
Date: 2003-05-28
Note: Type of Document - pdf; prepared on IBM PC ; to print on HP/PostScript/Franciscan monk; pages: 24 ; figures: included
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Working Paper: The euro goes East. Implications of the 2000-2002 economic slowdown for synchronisation of business cycles between the euro area and CEEs (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0305007

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