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Two sides of the same union? Reviving the Optimum Currency Areas theory from the business cycle synchronisation perspective

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  • Lubica Stiblarova
  • Marianna Sinicakova

Abstract

Unlike formally determined Maastricht convergence criteria for monetary union membership in Europe, we investigate the preparedness of the Central and Eastern European countries, using the business cycle synchronisation criterion primarily proposed by the Optimum Currency Areas theory. Applying the classical business cycle approach, we estimate the business cycles and measure their synchronisation with reference economies, with emphasis on their timing during the recent global crisis. In spite of identified medium-to-high level of synchronisation, our results reveal differences in the duration of business cycle phases, depth and timing compared to the euro area aggregate/Germany and the United States. These differences are associated with the character of small open economies and the country-specific economic (fiscal) policies of these former socialist countries.

Suggested Citation

  • Lubica Stiblarova & Marianna Sinicakova, 2020. "Two sides of the same union? Reviving the Optimum Currency Areas theory from the business cycle synchronisation perspective," Post-Communist Economies, Taylor & Francis Journals, vol. 32(3), pages 330-351, April.
  • Handle: RePEc:taf:pocoec:v:32:y:2020:i:3:p:330-351
    DOI: 10.1080/14631377.2019.1644589
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    Cited by:

    1. Benoit Dicharry & Lubica Stiblarova, 2023. "Positive externalities of the EU cohesion policy: Toward more synchronised CEE countries?," International Economics and Economic Policy, Springer, vol. 20(3), pages 485-508, July.
    2. Gandjon Fankem, Gislain Stéphane & Fouda Mbesa, Lucien Cédric, 2023. "Business cycle synchronization and African monetary union: A wavelet analysis," Journal of Macroeconomics, Elsevier, vol. 77(C).

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