Disentangling different patterns of business cycle synchronicity in the EU regions

Anagnostou, Ageliki; Panteladis, Ioannis; Tsiapa, Maria

doi:10.1007/s10663-014-9268-9

Cited by 8 publications

(7 citation statements)

References 63 publications

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“…However, after comparing the European Union with the United States, Clark and van Wincoop (2001) and Croux et al (2001) find that in the US the business cycles of the federal states are much more synchronized than those of the European Union member countries over the same period. In line with Massmann and Mitchell (2005) and Giannone and Reichlin (2006) is the paper by Anagnostou et al (2015), which supports the view that an increase in the levels of synchronization had occurred during the 1990s. 6 Recent evidence based on wavelet analysis (Aguiar-Conraria and Soares, 2011) and on a DF model (Lehwald, 2013) however casts doubts on the degree of generalization of the previous results for the EU.…”

Section: Literature Reviewsupporting

confidence: 80%

Synchronization patterns in the European Union

2022

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We propose a novel approach to investigate the synchronization of business cycles and we apply it to a Eurostat database of manufacturing industrial production time-series in the European Union (EU) over the 2000-2017 period. Our approach exploits Random Matrix Theory and extracts the latent information contained in a balanced panel data by cleaning it from possible spurious correlation. We employ this method to study the synchronization among different countries over time. Our empirical exercise tracks the evolution of the European synchronization patterns and identifies the emergence of synchronization clusters among different EU economies. We find that synchronization in the Euro Area increased during the first decade of the century and that it reached a peak during the Great Recession period. It then decreased in the aftermath of the crisis, reverting to the levels observable at the beginning of the 21st century. Second, we show that the asynchronous business cycle dynamics at the beginning of the century was structured along a East-West axis, with eastern European countries having a diverging business cycle dynamics with respect to their western partners. The recession brought about a structural transformation of business cycles co-movements in Europe. Nowadays the divide can be identified along the North vs. South axis. This recent surge in asynchronization might be harmful for the European Unio because it implies countries' heterogeneous responses to common policies.

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Section: Literature Reviewsupporting

confidence: 80%

Synchronization patterns in the European Union

2022

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“…To the best of our knowledge, existing studies dealing with regional cycle synchronization do not employ bilateral data and either simply illustrate the behaviour of cycle co-movement (Fatás 1997;Montoya and De Haan 2008) or concentrate on different aspects such as regional investments and employment and productivity dynamics (Anagnastou et al 2015;Marino 2013;Fingleton et al 2015). Our study hence represents a novelty in many respects.…”

Section: Introductionmentioning

confidence: 99%

Interregional Trade, Specialization, and the Business Cycle: Policy Implications for the EMU

2017

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In this paper we analyse the effects of trade and specialisation on regional business cycle co-movement in the Economic and Monetary Union. Using a novel and unique bilateral regional trade dataset, we find that regions with stronger trade linkages and similar economic structures have more synchronized cycles. These results suggest that policies fostering regional specialization at the European level may reduce business cycle synchronization across regions and countries. This, in turn, might generate macroeconomic tensions in the common currency area. On the other hand, market integration policies can foster regional cycle synchronization and favour the functioning of the monetary union.

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“…An example of this type of study, but for the EU, is Antonakakis and Tondl (2014). Anagnostou, Panteladis, and Tsiapa (2015) study business cycle synchronization in 14 EU countries' regions, between 1980 and2009. The authors, among other things, study the driving factors of business cycles synchronization, using a panel three-stage least squares (SLSs), such as trade integration, sectoral patterns of specialization, and regional productivity related to a gravity index, which they found to be significant in explaining business cycles synchronization. Asteriou and Moudatsou (2015) analyze the determinants of business cycle synchronization in the EU between 1998 and 2011, which takes into account the sovereign debt crisis period.…”

Section: Introductionmentioning

confidence: 99%

Determinants of co-movement and of lead and lag behavior of business cycles in the Eurozone

Duran

Ferreira-Lopes

2016

International Review of Applied Economics

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In this paper we study business cycle correlations in the Eurozone and its determinants. Additionally, we also analyze the determinants of the lead and lag behavior of business cycles in the Eurozone. We explore the relevance, in the Eurozone context, using GDP and employment as the business cycle measures, of the determinants of business cycle synchronization identified in the literature, namely bilateral trade intensity, dissimilarity of labor market rigidity, dissimilarity in industrial structures, financial openness, and foreign direct investment relations. We estimate a simultaneous 4-equations model by Ordinary Least Squares (OLS) and three-stage least square to investigate empirically the above-mentioned determinants of business cycle correlation. Bilateral trade relations present a positive influence on business cycle correlations, while the dissimilarity of labor market rigidity presents a negative influence. The rest of the above-mentioned variables are non-significant. These results are robust to the use of the Hodrick-Prescott-filter and first differences as the de-trending methods, as well as the use of GDP as the business cycle measure, excluding the financial crisis years (2008 and 2009). Results for employment as the business cycle measure are in contrast with the previous ones, and found industrial dissimilarity to be the relevant variable to determine business cycles synchronization. In what concerns the determinants of the lead and lag behavior, results show that the member states of the Eurozone that usually lead the cycle are the ones that are wealthier, with strict employment legislation, more specialized in construction and finance sectors, and more prone to international capital movements. Differences in the determinants between contemporaneous business cycles and lead and lag behavior of business cycles are especially important for policy-makers in the Eurozone to know about, in particular if asymmetric shocks between countries are set in place.

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Disentangling different patterns of business cycle synchronicity in the EU regions

Cited by 8 publications

References 63 publications

Synchronization patterns in the European Union

Synchronization patterns in the European Union

Interregional Trade, Specialization, and the Business Cycle: Policy Implications for the EMU

Determinants of co-movement and of lead and lag behavior of business cycles in the Eurozone

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