Jump to ContentJump to Main Navigation
Show Summary Details
More options …

Studies in Nonlinear Dynamics & Econometrics

Ed. by Mizrach, Bruce

5 Issues per year


IMPACT FACTOR 2017: 0.855

CiteScore 2017: 0.76

SCImago Journal Rank (SJR) 2017: 0.668
Source Normalized Impact per Paper (SNIP) 2017: 0.894

Mathematical Citation Quotient (MCQ) 2017: 0.02

Online
ISSN
1558-3708
See all formats and pricing
More options …
Volume 19, Issue 5

Issues

Business cycle (de)synchronization in the aftermath of the global financial crisis: implications for the Euro area

Stelios Bekiros
  • Corresponding author
  • IPAG Business School, 184 Boulevard Saint-Germain, 75006 Paris, France
  • European University Institute, Department of Economics, Via della Piazzuola 43, I-50133 Florence, Italy
  • Athens University of Economics and Business, Department of Finance, 76 Patission str, GR-104 34, Athens, Greece
  • Email
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
/ Duc Khuong Nguyen / Gazi Salah Uddin / Bo Sjö
Published Online: 2015-02-03 | DOI: https://doi.org/10.1515/snde-2014-0055

Abstract

The introduction of Euro currency was a game-changing event intended to induce convergence of Eurozone business cycles on the basis of greater monetary and fiscal integration. The benefit of participating into a common currency area exceeds the cost of losing autonomy in national monetary policy only in case of cycle co-movement. However, synchronization was put back mainly due to country-specific differences and asymmetries in terms of trade and fiscal policies that became profound at the outset of the global financial crisis. As opposed to previous studies that are mostly based on linear correlation or causality modeling, we utilize the cross-wavelet coherence measure to detect and identify the scale-dependent time-varying (de)synchronization effects amongst Eurozone and the broad Euro area business cycles before and after the financial crisis. Our results suggest that the enforcement of an active monetary policy by the ECB during crisis periods could provide an effective stabilization instrument for the entire Euro area. However, as dynamic patterns in the lead-lag relationships of the European economies are revealed, (de)synchronization varies across different frequency bands and time horizons.

This article offers supplementary material which is provided at the end of the article.

Keywords: convergence; Eurozone; integration; wavelet coherence

JEL Classification: C22; E32

References

  • Afonso, A., and D. Furceri. 2009. “Sectoral Business Cycle Synchronization in the European Union.” Economics Bulletin 29 (4): 2996–3014.Google Scholar

  • Aguiar-Conraria, L., and M. J. Soares. 2011. “Business Cycle Synchronization and the Euro: A Wavelet Analysis.” Journal of Macroeconomics 33 (3): 477–489.Web of ScienceCrossrefGoogle Scholar

  • Aguiar-Conraria, L., and M. J. Soares. 2013. “The Continuous Wavelet Transform: Moving Beyond Uni and Bivariate Analysis.” Journal of Economic Surveys 28 (2): 344–375.CrossrefWeb of ScienceGoogle Scholar

  • Aguiar-Conraria, L., N. Azevedo, and M. J. Soares. 2008. “Using Wavelets to Decompose the Time–Frequency Effects of Monetary Policy.” Physica A: Statistical Mechanics and its Applications 387 (12): 2863–2878.Web of ScienceGoogle Scholar

  • Angeloni, I., and L. Dedola. 1999. “From the ERM to the Euro: New Evidence on Economic and Policy Convergence Among EU Countries.” ECB Working Paper No. 4.Google Scholar

  • Artis, M. J., and W. Zhang. 1997. “International Business Cycles and the ERM: Is there a European Business Cycle?” International Journal of Finance and Economics 2 (1): 1–16.CrossrefGoogle Scholar

  • Artis, M., M. Marcelino, and T. Proietti. 2004. “Characterizing the Business Cycle for Accession Countries.” CEPR Discussion Paper N. 4457.Google Scholar

  • Artis, M., T. Proietti, and M. Marcellino. 2005. “Business Cycles in the New EU Member Countries and their Conformity with the Euro Area.” Journal of Business Cycle Measurement Analysis 2: 7–42.Google Scholar

  • Baxter, M., and M. Kouparitsas. 2005. “Determinants of Business Cycle Co-movement: A Robust Analysis.” Journal of Monetary Economics 52: 113–157.CrossrefGoogle Scholar

  • Bekiros, S., and M. Marcellino. 2013. “The Multiscale Causal Dynamics of Foreign Exchange Markets.” Journal of International Money and Finance 33: 282–305.CrossrefGoogle Scholar

  • Bergman, M. U. 2007. “How similar are European business cycles?” In Growth and Cycle in the Eurozone, edited by G. L. Mazzi, and G. Savio, Basingstoke, Hampshire, UK: Palgrave MacMillan.Google Scholar

  • Bordo, M. D., and T. F. Helbing. 2011. “International Business Cycle Synchronization in Historical Perspective.” The Manchester School 79 (2): 208–238.Web of ScienceCrossrefGoogle Scholar

  • Breitung, J., and B. Candelon. 2006. “Testing for Short and Long-Run Causality: A Frequency Domain Approach.” Journal of Econometrics 132: 363–378.CrossrefGoogle Scholar

  • Camacho, M., G. Perez-Quiros, and L. Saiz. 2006. “Are European Business Cycles Close Enough to be Just One?” Journal of Economic Dynamics and Control 30: 1687–1706.Web of ScienceGoogle Scholar

  • Camacho, M., G. Perez-Quiros, and L. Saiz. 2008. “Do European Business Cycles Look Like One?” Journal of Economic Dynamics and Control 32: 2165–2190.Web of ScienceGoogle Scholar

  • Caraiani, P. 2013. “The Uncertain Unit Root in GDP and CPI: A Wavelet-Based Perspective.” Applied Economics Letters 20 (3): 297–299.Web of ScienceCrossrefGoogle Scholar

  • Clark, T. E., and E. Wincoop. 2001. “Borders and Business Cycles.” Journal of International Economics 55: 59–85.CrossrefGoogle Scholar

  • Crowley, P. 2008. “One Money, Several Cycles? Evaluation of European Business Cycles using Model-Based Cluster Analysis.” Evaluation of European Business Cycles using Model-Based Cluster Analysis. Bank of Finland, Research Discussion Papers, 3/2008.Google Scholar

  • Dickey, D. A., and W. A. Fuller. 1981. “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root.” Econometrica 49 (4): 1057–1072.CrossrefGoogle Scholar

  • Fan, Y., and R. Gençay. 2010. “Unit Root Tests with Wavelets.” Econometric Theory 26 (5): 1305–1331.Web of ScienceCrossrefGoogle Scholar

  • Ferreira-Lopes, A., and A. M. Pina. 2011. “Business Cycles, Core, and Periphery in Monetary Unions: Comparing Europe and North America.” Open Economies Review 22 (4): 565–592.Web of ScienceCrossrefGoogle Scholar

  • Fidrmuc, J., and I. Korhonen. 2006. “Meta-Analysis of the Business Cycle Correlation Between the Euro Area and the CEECs.” Journal of Comparative Economics 34: 518–537.CrossrefGoogle Scholar

  • Forni, M., M. Hallin, M. Lippi, and L. Reichlin. 2000. “The Generalized Factor Model: Identification and Estimation.” Review of Economics and Statistics 82: 540–554.CrossrefWeb of ScienceGoogle Scholar

  • Furceri, D., and G. Karras. 2008. “Business Cycle Volatility and Country Size: Evidence for a Sample of OECD Countries.” Economics Bulletin 5 (3): 1–7.Google Scholar

  • Gençay, R., and N. Gradojevic. 2011. “Errors-In-Variables Estimation with Wavelets.” Journal of Statistical Computation and Simulation 81 (11): 1545–1564.Web of ScienceGoogle Scholar

  • Gençay, R., and D. Signori. 2015. “Multi-Scale Tests for Serial Correlation.” Journal of Econometrics 184 (1): 62–80.CrossrefWeb of ScienceGoogle Scholar

  • Gençay, R., B. Whitcher, and F. Selçuk. 2001. “Differentiating Intraday Seasonalities Through Wavelet Multi-Scaling.” Physica A 289 (3–4): 543–556.CrossrefGoogle Scholar

  • Gençay, R., B. Whitcher, and F. Selçuk. 2002. An Introduction to Wavelets and Other Filtering Methods in Finance and Economics. San Diego: Academic Press.Google Scholar

  • Gençay, R., N. Gradojevic, F. Selcuk, and B. Whitcher. 2010. “Asymmetry of Information flow Between Volatilities Across Time Scales.” Quantitative Finance 10: 895–915.Web of ScienceCrossrefGoogle Scholar

  • Geweke, J. 1982. “Measurement of Linear Dependence and Feedback Between Multiple Time Series.” Journal of American Statistical Association 77: 304–324.CrossrefGoogle Scholar

  • Grinsted, A., J. C. Moore, and S. Jevrejeva. 2004. “Application of the Cross Wavelet Transform and Wavelet Coherence to Geophysical Time Series.” Nonlinear Processes in Geophysics 11: 561–566.Google Scholar

  • Hosoya, Y. 1991. “The Decomposition and Measurement of the Interdependency Between Second-Order Stationary Processes.” Probability Theory and Related Fields 88 (4): 429–444.CrossrefGoogle Scholar

  • Imbs, J. 2004. “Trade, Finance, Specialization, and Synchronization.” The Review of Economics and Statistics 86: 723–734.CrossrefGoogle Scholar

  • Inklaar, R., and J. De Haan. 2001. “Is there Really a European Business Cycle? A Comment.” Oxford Economic Papers 53 (2): 215–220.CrossrefGoogle Scholar

  • Inklaar, R., R. Jong-A-Pin, and J. de Haan. 2008. “Trade and Business Cycle Synchronization in OECD Countries – A Re-examination.” European Economic Review 52: 646–666.CrossrefWeb of ScienceGoogle Scholar

  • Percival, D., and A. Walden. 2006. Wavelet Methods for Time Series Analysis. NY, USA: Cambridge University Press.Google Scholar

  • Phillips, P. C., and P. Perron. 1988. “Testing for a Unit Root in Time Series Regression.” Biometrika 75: 335–346.CrossrefGoogle Scholar

  • Ramsey, J. 2002. “Wavelets in Economics and Finance: Past and Future.” Studies in Nonlinear Dynamics and Econometrics 6: 1–27.Google Scholar

  • Ramsey, J. B., and C. Lampart. 1998a. “The Decomposition of Economic Relationships by Time Scale Using Wavelets: Money and Income.” Macroeconomic Dynamics 2: 49–71.Google Scholar

  • Ramsey, J. B., and C. Lampart. 1998b. “The Decomposition of Economic Relationships by Time Scale Using Wavelets: Expenditure and Income.” Studies in Nonlinear Dynamics & Econometrics 3 (1): 23–42.Google Scholar

  • Ramsey, J. B., D. Usikov, and G. M. Zaslavsky. 1995. “An Analysis of U.S. Stock Price Behavior Using Wavelets.” Fractals 3 (2): 377–389.CrossrefGoogle Scholar

  • Rose, A. K. 2000. “One Money, One Market: Estimating the Effect of Common Currencies on Trade.” Economic Policy 30: 7–33.Google Scholar

  • Rose, A., and C. Engel. 2002. “Currency Unions and International Integration.” Journal of Money, Credit and Banking 34: 1067–1089.CrossrefWeb of ScienceGoogle Scholar

  • Rua, A. 2010. “Measuring Comovement in the Time-Frequency Space.” Journal of Macroeconomics 32: 685–691.Web of ScienceCrossrefGoogle Scholar

  • Rua, A., and L. C. Nunes. 2009. “International Co-movement of Stock Returns: A Wavelet Analysis.” Journal of Empirical Finance 16 (4): 632–639.Web of ScienceGoogle Scholar

  • Torrence, C., and G. P. Compo. 1998. “A Practical Guide to Wavelet Analysis.” Bulletin of the American Meteorological Society 79: 605–618.CrossrefGoogle Scholar

  • Torrence, C., and P. Webster. 1999. “Interdecadal Changes in the ESNOM on Soon System.” Journal of Climate 12: 2679–2690.CrossrefGoogle Scholar

  • Wynne, M. A., and J. Koo. 2000. “Business Cycles under Monetary Union: A Comparison of the EU and US.” Economica 67: 347–374.CrossrefGoogle Scholar

  • Xue, Y., R. Gençay, S. Fagan. 2013. “Jump Detection with Wavelets for High-Frequency Financial Time Series.” Quantitative Finance 14 (8): 1427–1444.Web of ScienceCrossrefGoogle Scholar

  • Zivot, E., and D. Andrews. 1992. “Further Evidence on the Great Crash, The Oil Price Shock, and the Unit Root Hypothesis.” Journal of Business and Economic Statistics 10: 251–270.Google Scholar

About the article

Corresponding author: Stelios Bekiros, IPAG Business School, 184 Boulevard Saint-Germain, 75006 Paris, France; European University Institute, Department of Economics, Via della Piazzuola 43, I-50133 Florence, Italy; and Athens University of Economics and Business, Department of Finance, 76 Patission str, GR-104 34, Athens, Greece, Tel.: +33 01 53 63 36 00, Fax: +33 01 45 44 40 46, e-mail:


Published Online: 2015-02-03

Published in Print: 2015-12-01


Citation Information: Studies in Nonlinear Dynamics & Econometrics, Volume 19, Issue 5, Pages 609–624, ISSN (Online) 1558-3708, ISSN (Print) 1081-1826, DOI: https://doi.org/10.1515/snde-2014-0055.

Export Citation

©2015 by De Gruyter.Get Permission

Supplementary Article Materials

Citing Articles

Here you can find all Crossref-listed publications in which this article is cited. If you would like to receive automatic email messages as soon as this article is cited in other publications, simply activate the “Citation Alert” on the top of this page.

[1]
Joanna Bruzda
Studies in Nonlinear Dynamics & Econometrics, 2015, Volume 19, Number 5

Comments (0)

Please log in or register to comment.
Log in