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

Stelios Bekiros, Duc Khuong Nguyen 1 , Gazi Salah Uddin 4 ,  and Bo Sjö 4
  • 1 IPAG Business School, 184 Boulevard Saint-Germain, 75006 Paris, France
  • 2 European University Institute, Department of Economics, Via della Piazzuola 43, I-50133 Florence, Italy
  • 3 Athens University of Economics and Business, Department of Finance, 76 Patission str, GR-104 34, Athens, Greece
  • 4 Linköping University, Department of Management and Engineering, SE-581 83 Linköping, Sweden
Stelios Bekiros, Duc Khuong Nguyen, Gazi Salah Uddin and Bo Sjö


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.

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SNDE recognizes that advances in statistics and dynamical systems theory can increase our understanding of economic and financial markets. The journal seeks both theoretical and applied papers that characterize and motivate nonlinear phenomena. Researchers are required to assist replication of empirical results by providing copies of data and programs online. Algorithms and rapid communications are also published.