Business cycle synchronisation between the V4 countries and the euro area

Business cycle synchronisation between the V4 countries and the euro area is important in regard to the costs of the common monetary policy. This paper addresses the issue of business cycle synchronisation by directly calculating cross correlations, by calculating cross correlations from primary impulses, and finally by calculating output gap component correlations from common and country-specific shocks. In regard to the output gap, the results of all three methods are approximately the same: before 2001, the business cycles of the V4 countries were not synchronised with the euro area (low or negative correlations); between 2001 and 2007, the correlations entered positive territory as the V4 countries joined the EU and trade between the V4 countries and the euro area increased; and during the economic crisis of 2008–2009, synchronisation increased still further.