Time Varying Cyclical Analysis for Economies in Transition

21 Pages Posted: 23 Jul 2009

See all articles by Andrew J. Hughes

Andrew J. Hughes

Cardiff Business School; Centre for Economic Policy Research (CEPR); Vanderbilt University - College of Arts and Science - Department of Economics

Christian R. Richter

Loughborough University - Department of Economics

Date Written: January 2007

Abstract

The identification of a possible European business cycle has been inconclusive and is complicated by the enlargement to the new member states and their transition to market economies. This paper shows how to decompose a business cycle into a time-frequency framework in a way that allows us to accommodate structural breaks and nonstationary variables. To illustrate, calculations of the growth rate spectrum and coherences for the Hungarian, Polish, German and French economies show the instability of the transition period. However, since then there has been convergence on the Eurozone economy at short cycle lengths, but little convergence in long cycles. We argue that this shows evidence of nominal convergence, but little real convergence. The Maastricht criteria for membership of the Euro therefore need to be adapted to test for real convergence.

Keywords: time-frequency analysis, coherence, growth rates, business cycle

JEL Classification: C22, C29, C49, F43, O49

Suggested Citation

Hughes Hallett, Andrew J. and Richter, Christian R., Time Varying Cyclical Analysis for Economies in Transition (January 2007). CASE Network Studies and Analyses No. 334, Available at SSRN: https://ssrn.com/abstract=1436987 or http://dx.doi.org/10.2139/ssrn.1436987

Andrew J. Hughes Hallett (Contact Author)

Cardiff Business School ( email )

Aberconway Building
Cardiff CF10 3EU
United Kingdom
+44 292 087 001 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States
615-322-8539 (Phone)
615-343-8495 (Fax)

Christian R. Richter

Loughborough University - Department of Economics ( email )

York House
Loughborough LE11 3TU
Great Britain

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