Business Cycle Synchronization between Euro Area andCentral andEasternEuropeanCountries

Abstract

We analyze the degree of co‐movements in real macroeconomic aggregates across selected euro area and Central and Eastern European (CEE) countries applying a multi‐factor model. Our results suggest that the evolution of the global European factor matches well the narrative of main economic events between 1995 and 2011, capturing among others the recession during the recent global financial and economic crisis. This factor plays a central role in explaining real output growth variability in euro area and is negligible in CEE countries. Furthermore, using Markov switching models and concordance indices, we shed light on an increase in business cycle synchronization, with the degree of concordance between country‐specific and European business cycles being high.

Business Cycle Synchronization of the Visegrad Four and the European Union

“…With respect to Hungary and the Czech Republic, their business cycles co-move with the EU-12 after 2005. Jiménez- Rodríguez et al (2013) also find high correlations of CEE countries (except for the Czech Republic) with the EU business cycle. However, contrary to this result, they find that these countries exhibit a lower level of concordance when a factor model is employed.…”

The transmission of business cycles: Lessons from the 2004 enlargement of the EU and the adoption of the euro

“…They suggested that some countries like Slovakia and Slovenia—already EA members—react more strongly to foreign industrial production shocks than other countries. In another study (Jimenez‐Rodríguez, Morales‐Zumaquero, & Egert, ), these authors found the same result: Slovakia and Slovenia exhibit a high degree of concordance with the European business cycle. The degree of concordance is similar to that of the Netherlands or Spain.…”

Business and Financial Cycles in the Eurozone: Synchronization or Decoupling

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