Business Cycle Synchronisation in a Currency Union: Taking Stock of the Evidence

Handbook of Regional Cooperation and Integration

“…The growing economic interaction between the member countries was accompanied by more competition, further price convergence, and a stronger business cycle correlation. About half of this positive synchronisation effect could be attributed to the introduction of the single currency (Campos, Fidrmuc and Korhonen, 2017). Taken on its own, this evidence suggests that EMU was moving closer to an optimum currency area over time.…”

Structural time series models and synthetic controls—assessing the impact of the euro adoption

“…Integrating financial markets to share risk appears to be an effective tool, but eurozone members are not integrating deeply enough. The empirical literature on the synchronization of business cycles and shocks (see Campos et al (2017), Campos & Macchiarelli (2016), Wortmann & Stahl (2016), Fingleton et al 2015, Pentecôte & Huchet-Bourdon (2012) concludes that there is a core-periphery pattern in the EMU, first identified in Bayoumi & Eichengreen (1993). The core consists of Germany, Austria, Netherlands, Belgium, France, Luxembourg and Finland and is more synchronized, which makes the core countries (better) suited for the formation of a monetary union than the periphery (Greece, Ireland, Italy, Spain and Portugal).…”

Macroeconomic asymmetry in the Eurozone before and after the Global Financial Crisis: An appraisal of the role of the ECB

“…König and Ohr (2013) elaborate a composite indicator measuring the extent of economic integration within the EU that shows the existence of large heterogeneities between the member states as well as a strong clustering of its members. Campos et al (2017) provides evidence to show that the business cycle has becomes more homogeneous among EMU economies. However, Franks et al (2018) andEurope Economics (2013) show that cycle convergence has not increased among the original Eurozone 12 member states, but mainly between the new Eurozone member states and the rest of the Eurozone.…”