Output Correlation and EMU: Evidence from European Countries

Kazuyuki Inagaki

Journal of Economic Integration, 2006, vol. 21, 458-473

Abstract:

This paper examines the endogenous nature of business cycle synchronization. Using the residual cross-correlation approach, we explore output correlation between European EMU member countries. Our findings can be summarized as follows: (i) contemporaneous correlation estimates become more significant during the EMU period; (ii) business cycles are dependent but not highly synchronized during the pre-EMU period; (iii) after the transition to EMU, business cycles are dependent and more highly synchronized. These empirical results suggest that costs arising from asymmetric business cycles have a tendency to decrease. On these grounds, we conclude that the endogeneity of OCA hypothesis holds in the case of the euro area.

Keywords: EMU; Endogeneity of OCA; Output correlation (search for similar items in EconPapers)
JEL-codes: E32 F15 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0365

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