Are European Business Cycles Close Enough to Be Just One?

49 Pages Posted: 13 Apr 2005

See all articles by Maximo Camacho

Maximo Camacho

Autonomous University of Barcelona - Department of Economics; Universidad de Murcia - Departamento de Metodos Cuantitativos

Gabriel Perez-Quiros

Banco de España

Lorena Saiz

Banco de España

Date Written: January 2005

Abstract

We propose a comprehensive methodology to characterize the business cycle comovements across European economies and some industrialized countries, always trying to 'let the data speak'. Out of this framework, we propose a novel method to show that there is no 'Euro economy' that acts as an attractor to the other economies of the area. We show that the relative comovements across EU economies are prior to the establishment of the Monetary Union. We are able to explain an important proportion of the distances across their business cycles using macro-variables related to the structure of the economy, to the directions of trade, and to the size of the public sector. Finally, we show that the distances across countries that belong to the European Union are smaller than the distances across newcomers.

Keywords: Business cycle synchronization, economic integration, European union enlargement, cluster analysis, multidimensional scaling

JEL Classification: C22, E32, F02

Suggested Citation

Camacho, Maximo and Perez-Quiros, Gabriel and Saiz, Lorena, Are European Business Cycles Close Enough to Be Just One? (January 2005). Available at SSRN: https://ssrn.com/abstract=702941

Maximo Camacho (Contact Author)

Autonomous University of Barcelona - Department of Economics ( email )

Avda. Diagonal 690
Barcelona, 08034
Spain

Universidad de Murcia - Departamento de Metodos Cuantitativos ( email )

Campus de Espinardo
30100 Murcia
Spain
+34 968 367 982 (Phone)

Gabriel Perez-Quiros

Banco de España ( email )

Madrid 28014
Spain

Lorena Saiz

Banco de España ( email )

Madrid 28014
Spain

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