Business Cycle Synchronisation in EU: A Time-Varying Approach

MPRA Paper No. 80437

33 Pages Posted: 26 Oct 2018

See all articles by Stavros Antonios Degiannakis

Stavros Antonios Degiannakis

Department of Economic and Regional Development, Panteion University of Political and Social Sciences

David Duffy

Economic & Social Research Institute (ESRI)

George N. Filis

Bournemouth University

Date Written: 2014

Abstract

This paper investigates the time-varying correlation between the EU12-wide business cycle and the initial EU12 member-countries based on Scalar-BEKK and multivariate Riskmetrics model frameworks for the period 1980-2012. The paper provides evidence that changes in the business cycle synchronisation correspond to major economic events that have taken place at a European level. In the main, business cycle synchronisation until 2007 had moved in a direction positive for the operation of a single currency, suggesting that the common monetary policy was less costly in terms of lost flexibility at the national level. However, as a result of the Great Recession of 2007 and the subsequent Eurozone Crisis a number of periphery countries, most notably Greece, have experienced desynchronisation of their business cycles with the EU12-wide cycle. Nevertheless, for most countries, any questions regarding the optimality and sustainability of the common currency area in Europe should not be attributed to a lack of cyclical synchronisation.

Keywords: Scalar-BEKK, Multivariate Riskmetrics, Time Varying Correlation, EU Business Cycle, Business Cycle Synchronisation

JEL Classification: C32, E32, F44, O52

Suggested Citation

Degiannakis, Stavros Antonios and Duffy, David and Filis, George N., Business Cycle Synchronisation in EU: A Time-Varying Approach (2014). MPRA Paper No. 80437, Available at SSRN: https://ssrn.com/abstract=3259835

Stavros Antonios Degiannakis (Contact Author)

Department of Economic and Regional Development, Panteion University of Political and Social Sciences ( email )

136 Sygrou
Athens
Greece

David Duffy

Economic & Social Research Institute (ESRI) ( email )

Dublin 4
Ireland

George N. Filis

Bournemouth University ( email )

Fern Barrow
Poole BH12 5BB, Dorset BH8 8EB
United Kingdom

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