Growth Cycle Synchronization of the Visegrad Four and the European Union

Abstract

In this paper, we map the process of business In this paper, we map the growth cycle synchronization across the European Union, specifically focusing on the position of the Visegrad Four countries. We study the synchronization using frequency and time-frequency domain. To accommodate for dynamic relationships among the countries we propose a wavelet cohesion measure with time-varying weights. Analyzing quarterly data from 1995 to 2017, we show an increasing co-movement of the Visegrad Four countries with the European Union after the countries have accessed the European Union. We show that participation in a currency union increases the co-movement of the country adopting the Euro. Furthermore, we find a high degree of synchronization at business cycle frequencies of the Visegrad Four and countries of the European monetary union.

Keywords: business cycle synchronization, time-frequency, wavelets, co-movement, Visegrad Four, European Union

JEL Classification: E32, C40, F15