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http://ssrn.com/abstract=872705
 
 

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Decomposing the Co-Movement of the Business Cycle: A Time-Frequency Analysis of Growth Cycles in the Euro Area


Patrick M. Crowley


Texas A&M University - Department of Finance, Economics, & Decision Sciences; Bank of Finland - Research

Jim Lee


Texas A&M University - Department of Finance, Economics, & Decision Sciences

December 2005

Bank of Finland Research Discussion Paper No. 12/2005

Abstract:     
This article analyses the frequency components of European business cycles using real GDP by employing multiresolution decomposition (MRD) with the use of maximal overlap discrete wavelet transforms (MODWT). Static wavelet variance and correlation analysis is performed, and phasing is studied using co-correlation with the euro area by scale. Lastly dynamic conditional correlation GARCH models are used to obtain dynamic correlation estimates by scale against the EU to evaluate synchronicity of cycles through time. The general findings are that euro area members fall into one of three categories: i) high and dynamic correlations at all frequency cycles (e.g. France, Belgium, Germany), ii) low static and dynamic correlations, with little sign of convergence occurring (e.g. Greece), and iii) low static correlation but convergent dynamic correlations (e.g. Finland and Ireland).

Number of Pages in PDF File: 72

Keywords: business cycles, growth cycles, European Union, multiresolution

JEL Classification: C65, E32, O52

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Date posted: December 29, 2005  

Suggested Citation

Crowley, Patrick M. and Lee, Jim, Decomposing the Co-Movement of the Business Cycle: A Time-Frequency Analysis of Growth Cycles in the Euro Area (December 2005). Bank of Finland Research Discussion Paper No. 12/2005. Available at SSRN: http://ssrn.com/abstract=872705 or http://dx.doi.org/10.2139/ssrn.872705

Contact Information

Patrick M. Crowley (Contact Author)
Texas A&M University (TAMU) - Department of Finance, Economics, & Decision Sciences ( email )
Corpus Christi, TX 78412
United States
Bank of Finland - Research ( email )
P.O. Box 160
FIN-00101 Helsinki
Finland
Jim Lee
Texas A&M University (TAMU) - Department of Finance, Economics, & Decision Sciences ( email )
Corpus Christi, TX 78412
United States
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