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Cyclical synchronization in the EMU along the financial crisis: An interpretation of the conflicting signals

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  • Jose Ramon Cancelo

    (University of A Coruña)

Abstract

We analyze how cyclical synchronization in the EMU evolved since the onset of the current financial crisis. The standard measures of cyclical correlation suggest that while the cycle of the euro area became more aligned with the cycles of other developed economies, the EMU itself apparently entered into a phase of cyclical divergence. We show that as a matter of fact the bulk of the member states remained closely aligned, and the seeming decline in synchronization is due to a few countries decoupling from the euro area. Next we present empirical evidence that the foundations that explain the evolution of the national cycles against the EMU aggregate through the crisis were already latent in 2007. Greece and Ireland deviate from the general pattern, the former because of its loose fiscal policy all along the period 2000-2007, and the latter due to the flexibility of its labor market.

Suggested Citation

  • Jose Ramon Cancelo, 2012. "Cyclical synchronization in the EMU along the financial crisis: An interpretation of the conflicting signals," European Journal of Government and Economics, Europa Grande, vol. 1(1), pages 86-100, June.
    • Handle: RePEc:egr:ejge00:v:1:i:1:p:86-100
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    References listed on IDEAS

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    Cited by:

    1. Ionut Jianu, 2020. "Examining the drivers of business cycle divergence between Euro Area and Romania," Papers 2007.11407, arXiv.org.
    2. Ionuț JIANU, 2020. "Examining the drivers of business cycle divergence between Euro Area and Romania," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(623), S), pages 19-32, Summer.
    3. Simona Hašková & Marek Vochozka, 2018. "Duality in Cyclical Trends in European Union Confirmed," SAGE Open, , vol. 8(1), pages 21582440177, January.
    4. Theophilos Papadimitriou & Periklis Gogas & Georgios Sarantitis, 2016. "Convergence of European Business Cycles: A Complex Networks Approach," Computational Economics, Springer;Society for Computational Economics, vol. 47(2), pages 97-119, February.
    5. Diego Varela & Giacomo Benedetto & Jose Manuel Sanchez-Santos, 2014. "Editorial statement: Lessons from Goodhart’s law for the management of the journal," European Journal of Government and Economics, Europa Grande, vol. 3(2), pages 100-103, December.
    6. Escañuela Romana, Ignacio, 2013. "¿Convergen los ciclos económicos de los estados de la zona euro?: evidencia empírica [Do Economic Cycles Converge In The Euro Zone?: Empirical Evidence]," MPRA Paper 48145, University Library of Munich, Germany.
    7. Jianu, Ionut, 2020. "Examining the drivers of business cycle divergence between Euro Area and Romania," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 27(2), pages 19-32.

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    More about this item

    Keywords

    international business cycles; euro area; cyclical convergence; asymmetric responses;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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