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A Tale of Two Cycles: Co-fluctuations Between UK Regions and the Euro Zone

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  • S Barrios
  • M Brülhart
  • R J R Elliott
  • M Sensier

Abstract

We examine the patterns and determinants of business-cycle correlations among eleven UK regions and six euro-zone countries over the 1966-1997 period, using GMM to allow for sampling error in comparing estimated correlations. The British business cycle is found to be persistently out of phase with that of the main euro-zone economies, and the trend is towards lower correlations. We detect only minor cyclical heterogeneity among UK regions. Differences in sectoral specialisation drive some of the asymmetry in GDP fluctuations, but they do not appear significant in explaining the observed reduction in UK-EU business-cycle correlations over time.

Suggested Citation

  • S Barrios & M Brülhart & R J R Elliott & M Sensier, 2002. "A Tale of Two Cycles: Co-fluctuations Between UK Regions and the Euro Zone," Centre for Growth and Business Cycle Research Discussion Paper Series 03, Economics, The University of Manchester.
    • Handle: RePEc:man:cgbcrp:03
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    More about this item

    Keywords

    business cycles; co-fluctuations; UK regions; European monetary union; optimum currency areas;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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