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Asynchronous Business Cycles in the E.U.: the Effect of the Common Currency

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  • Gogas, Periklis

    (Democritus University of Thrace, Department of International Economic Relations and Development)

Abstract

The purpose of this paper is to examine the effectiveness of the policies and procedures towards economic convergence between the countries that participated in the European Exchange Mechanism I and which are now members states of the Eurozone. The question posed is whether the introduction of the common currency has strengthened the synchronisation of the business cycles of the member states or it has acted as the monetary ground for the creation of a multi-speed Europe that includes economies that bear little resemblance in terms of their basic economic features and figures and especially with respect to the fluctuations in their Gross Domestic Product. The empirical analysis is done through the use of linear regressions, the estimation of the correlation coefficient, and also a proposed sign concordance index (SCI). The results provide evidence that the synchronisation of the cycles seems to become weaker since the adoption of the new currency. Especially for G6, the group of the smaller regional economies, the results are consistent throughout all three methodologies used and for both groups of countries’ cycles used as a comparison base, the broad EU15 and the narrow G3.

Suggested Citation

  • Gogas, Periklis, 2010. "Asynchronous Business Cycles in the E.U.: the Effect of the Common Currency," DUTH Research Papers in Economics 4-2010, Democritus University of Thrace, Department of Economics.
    • Handle: RePEc:ris:duthrp:2010_004
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    References listed on IDEAS

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    1. Böwer, Uwe & Guillemineau, Catherine, 2006. "Determinants of business cycle synchronisation across euro area countries," Working Paper Series 587, European Central Bank.
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    More about this item

    Keywords

    Business Cycle; Synchronisation; Eurozone;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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