European Business Cycle Synchronization: a Complex Network Perspective

In this paper we attempt to provide empirical evidence on the issue of business cycle synchronization within Europe. The issue of business cycle convergence is important and very topical as it is a prerequisite for the implementation of an effective and successful monetary policy within a monetary union. We employ for the first time in this context (to the best of our knowledge) Complex Network metrics and we identify the corresponding Minimum Dominating Set of countries in terms of their GDP growth. An obvious focal point for our comparison of business cycle convergence is the adoption of a common currency (the euro) in 1999. By doing so, we reveal the evolution of GDP growth co-movement patterns of European economies before and after the introduction of the euro. The main findings from our empirical analysis provide evidence in favor of macroeconomic convergence after the introduction of the common currency.