Business Cycle Synchronisation in EU: A time-varying approach

Stavros Degiannakis, David Duffy and George Filis

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the time-varying correlation between the EU12-wide business cycle and the initial EU12 member-countries based on Scalar-BEKK and multivariate Riskmetrics model frameworks for the period 1980-2012. The paper provides evidence that changes in the business cycle synchronisation correspond to major economic events that have taken place at a European level. In the main, business cycle synchronisation until 2007 had moved in a direction positive for the operation of a single currency, suggesting that the common monetary policy was less costly in terms of lost flexibility at the national level. However, as a result of the Great Recession of 2007 and the subsequent Eurozone Crisis a number of periphery countries, most notably Greece, have experienced desynchronisation of their business cycles with the EU12-wide cycle. Nevertheless, for most countries, any questions regarding the optimality and sustainability of the common currency area in Europe should not be attributed to a lack of cyclical synchronisation.

Keywords: Scalar-BEKK; Multivariate Riskmetrics; time varying correlation; EU business cycle; business cycle synchronisation. (search for similar items in EconPapers)
JEL-codes: C32 E32 F44 O52 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Published in Scottish Journal of Political Economy 61.4(2014): pp. 348-370

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Journal Article: Business Cycle Synchronization in EU: A Time-Varying Approach (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:80437

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