'Out of Sync': The Breakdown of Economic Sentiment Cycles in the EU

20 Pages Posted: 15 Jan 2014

See all articles by Dimitrios D. Thomakos

Dimitrios D. Thomakos

University of Peloponnese

Fotis Papailias

Quantf Research; University of London, King's College London, Department of Management

Date Written: February 2014

Abstract

Empirical evidence is presented about the properties of economic sentiment cycle synchronization for Germany, France and the UK and they are compared with the “crisis” countries Italy, Spain, Portugal and Greece. Instead of using output data it is preferred to focus on the economic sentiment indicator (ESI), a forward‐looking, survey‐based variable consistently available from 1985. The cyclical nature of the ESI allowed the analyis of the presence or not of synchronicity among country pairs before and after the onset of the financial crisis. The results show that ESI movements were mostly synchronous before 2008 but they exhibit a breakdown after 2008, with this feature being more prominent in Greece. It is also found that, after the political maneuvering of the past two years, a cycle re‐integration or re‐synchronization is on the way. An analysis of the evolution of the synchronicity measures indicates that they can potentially be used to identify sudden phase breaks in ESI co‐movement and they can offer a signal as to when the EU economies are getting “in” or “out of sync”.

Suggested Citation

Thomakos, Dimitrios D. and Papailias, Fotis, 'Out of Sync': The Breakdown of Economic Sentiment Cycles in the EU (February 2014). Review of International Economics, Vol. 22, Issue 1, pp. 131-150, 2014. Available at SSRN: https://ssrn.com/abstract=2379182 or http://dx.doi.org/10.1111/roie.12101

Dimitrios D. Thomakos (Contact Author)

University of Peloponnese

Fotis Papailias

Quantf Research ( email )

London
United Kingdom

HOME PAGE: http://www.quantf.com

University of London, King's College London, Department of Management ( email )

150 Stamford Street
London, SE1 9NN
United Kingdom

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