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Monetary Union and the Outsiders - A Cointegration/ Codependence Analysis of Business Cycles in Europe

Jonathan Rubin and Niels Thygesen
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Jonathan Rubin: Institute of Economics, University of Copenhagen
Niels Thygesen: Institute of Economics, University of Copenhagen

No 96-08, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: A cointegration/codependence analysis of monthly production and price indices in EU member states during the 1983-1994 period yields evidence that responses to cyclical innovations become coordinated after three months, and that each of the contries studied exhibit a business cycle in one of three possible phases. This suggests that the 9 countries studied show a sufficient degree of co-movement in their main economic series to make their participation in a monetary union feasible. This has implications for a currently plausible scenario in which a core group qualifies according to the criteria in the Maastricht Treaty while others do not. Our analysis suggests little difference between six presumed 'insiders' and three likely 'outsiders' with regard to coordination of their business cycles.

JEL-codes: E32 F36 (search for similar items in EconPapers)
Pages: 64 pages
Date: 1996-06
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Published in: Economie Appliquée, 1996, 49(3) pp 123-71

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