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

21 Pages Posted: 12 Apr 2012

See all articles by Periklis Gogas

Periklis Gogas

Democritus University of Thrace - Department of Economics

Date Written: April 11, 2012

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, 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.

Keywords: Business Cycle, Synchronisation, Eurozone

JEL Classification: E32

Suggested Citation

Gogas, Periklis, Asynchronous Business Cycles in the E.U.: The Effect of the Common Currency (April 11, 2012). Available at SSRN: https://ssrn.com/abstract=2038615 or http://dx.doi.org/10.2139/ssrn.2038615

Periklis Gogas (Contact Author)

Democritus University of Thrace - Department of Economics ( email )

Komotini, 69100
Greece

HOME PAGE: http://www.econ.duth.gr/personel/dep/gkogkas/index.en.shtml

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