Business Cycle Synchronization and Asymmetry in the European Union

58 Pages Posted: 9 Feb 2022 Last revised: 15 Nov 2023

See all articles by Vladimir Arcabic

Vladimir Arcabic

University of Zagreb - Faculty of Economics & Business

Irina Panovska

University of Texas at Dallas

Josip Tica

University of Zagreb

Date Written: November 14, 2023

Abstract

We analyze business cycle movements and synchronization for all European Union members. To account for model uncertainty in the output gap estimation, we propose averaging across a set of output gap models both by using a Phillips Curve motivated weighted average and a simple average. Similarly, we measure synchronization using a set of measures that account for the business cycle phase and amplitude. Three sets of robust results emerge. First, when using a single model, both the estimated gaps and the level of synchronization can send different signals depending on the statistical model used by the researcher. Second, our averaged estimated gaps match recession dates well and suggest that many of the countries exhibit a high degree of business cycle nonlinearities both for the 1975-pre-COVID period and 1975q1-2022q4. Finally, the core Eurozone countries are highly synchronized, but there are differences in synchronization among non-Eurozone and peripheral Eurozone member states.

Keywords: business cycle synchronization, output gaps, business cycle asymmetry, Eurozone

JEL Classification: E32, E37, E52, F44, C22

Suggested Citation

Arcabic, Vladimir and Panovska, Irina and Tica, Josip, Business Cycle Synchronization and Asymmetry in the European Union (November 14, 2023). Available at SSRN: https://ssrn.com/abstract=4025508 or http://dx.doi.org/10.2139/ssrn.4025508

Vladimir Arcabic

University of Zagreb - Faculty of Economics & Business ( email )

Trg J. F. Kennedyja 6
Zagreb, 10000
Croatia

Irina Panovska (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Josip Tica

University of Zagreb ( email )

Trg maršala Tita 14
Zagreb
Croatia

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