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Output Correlation and EMU: Evidence from European Countries

Author

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  • Inagaki, Kazuyuki

    (Graduate School of Economics, Kobe University)

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.

Suggested Citation

  • Inagaki, Kazuyuki, 2006. "Output Correlation and EMU: Evidence from European Countries," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 458-473.
    • Handle: RePEc:ris:integr:0365
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    Citations

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    Cited by:

    1. Scott W. Hegerty, 2019. "Common Baltic-Nordic business cycles: Correlation- versus Markov-switching approaches," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(4), December.
    2. Michal Bencik, 2011. "Business cycle synchronisation between the V4 countries and the euro area," Working and Discussion Papers WP 1/2011, Research Department, National Bank of Slovakia.

    More about this item

    Keywords

    EMU; Endogeneity of OCA; Output correlation;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F15 - International Economics - - Trade - - - Economic Integration

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