The Euro Goes East: Implications of the 2000-2002 Economic Slowdown for Synchronisation of Business Cycles between the Euro Area and Ceecs

24 Pages Posted: 14 Feb 2017  

Jarko Fidrmuc

Zeppelin University Friedrichshafen; Charles University in Prague

Iikka Korhonen

Bank of Finland - Institute for Economies in Transition (BOFIT)

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Date Written: August 30, 2003

Abstract

We assess the correlation of supply and demand shocks between current countries in the euro area and EU accession candidates from 1993/1995 to 2002.Supply and demand shocks are recovered from estimated structural VAR models of output growth and inflation. Notably, the economic slowdown between 2000 and 2002 increased heterogeneity of business cycles between the euro area and acceding counties.We find that several acceding countries have a quite high correlation of underlying shocks with the euro area and conclude that continuing integration within the EU is likely to align the business cycles of these countries in a manner similar to the synchronisation of supply and demand shocks we document for the EU in the 1990s.JEL numbers E32, F42.Keywords: Optimum currency area, EU enlargement, structural VAR.

JEL Classification: E32, F42

Suggested Citation

Fidrmuc, Jarko and Korhonen, Iikka, The Euro Goes East: Implications of the 2000-2002 Economic Slowdown for Synchronisation of Business Cycles between the Euro Area and Ceecs (August 30, 2003). BOFIT Discussion Paper No. 6/2003. Available at SSRN: https://ssrn.com/abstract=2914044

Jarko Fidrmuc (Contact Author)

Zeppelin University Friedrichshafen ( email )

Am Seemooser Horn 20
Friedrichshafen, 88045
Germany

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Iikka Korhonen

Bank of Finland - Institute for Economies in Transition (BOFIT) ( email )

P.O.Box 160
Helsinki 00101
Finland

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