Has the Euro changed business cycle synchronization? Evidence from the core and the periphery

Lehwald, Sybille

doi:10.1007/s10663-012-9205-8

Cited by 50 publications

(36 citation statements)

References 29 publications

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“…These findings suggest the existence in the euro period of both output synchronisation (see, for instance, Lehwald, 2012) and more structural differences. More specifically, it seems that trade intensity has led to higher business cycle correlation only among the core countries, but not in the case of the periphery.…”

Section: Rolling Averagesmentioning

confidence: 79%

Trade intensity and output synchronisation: On the endogeneity properties of EMU

Caporale

Santis

Girardi

2015

Journal of Financial Stability

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Using annual bilateral data over the period 1988-2011 for a panel of 24 industrialised and emerging economies, we analyse in a time-varying framework the determinants of output synchronisation in EMU (European Monetary Union) distinguishing between core and peripheral member states. The results support the specialisation paradigm rather than the endogeneity hypothesis. Evidence is found in the euro period of diverging patterns between the core and the peripheral EMU countries raising questions about the future stability of EMU. JEL Classifications: F10, F15, F17, F4

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Section: Rolling Averagesmentioning

confidence: 79%

Trade intensity and output synchronisation: On the endogeneity properties of EMU

Caporale

Santis

Girardi

2015

Journal of Financial Stability

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“…Business cycles may diverge even between neighbouring countries when their economic development stages, structures or behaviours diverge. Employing a dynamic factor model (specifying a euro factor, country factors and idiosyncratic factors specific to each time series), Lehwald (2012) compares a pre-euro period (1991)(1992)(1993)(1994)(1995)(1996)(1997)(1998) to a euro period (2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010) by decomposing macroeconomic fluctuations in output, consumption and investment changes. Her results suggest that, with the introduction of the euro, business cycle synchronisation was enhanced for core members while it weakened for periphery countries.…”

Section: Figure 3: Symmetry and Openness In Monetary Unionsmentioning

confidence: 99%

The Eurozone: Piecemeal Approach to an Optimum Currency Area

Handler

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractSoon after the establishment of the Eurozone it became obvious that the structural differences between member countries would not abate, as expected, but rather gradually widen. Although part of the problem can be attributed to the enlargement process, it also relates to asymmetric effects of the common currency and to diverging economic policies. This paper discusses the literature which associates the economic characteristics of EMU with arguments of the optimum currency area (OCA) theory and asks for missing capstones that would meliorate EMU to eventually resemble an OCA. As potential candidates for such building blocks, some sort of fiscal union and lender of last resort may qualify, drawing on the experiences of other currency unions and federal states. The financial and debt crisis has revealed that the endogenous forces within a currency union may be too slow to absorb the shocks originating from the crisis. For a currency union to survive in such a situation it is all the more important that the OCA criteria are met and/or that complementary institutions are in place. However, as actual developments in the Eurozone reveal, the political process of approaching an OCA is piecemeal rather than comprehensive and prompt. AbstractSoon after the establishment of the Eurozone it became obvious that the structural differences between member states would not abate, as expected, but rather gradually widen. Although part of the problem can be attributed to the enlargement process, it also relates to asymmetric effects of the common currency and to diverging economic policies. This paper discusses the literature which associates the economic characteristics of EMU with arguments of the optimum currency area (OCA) theory and asks for missing capstones that would meliorate EMU to eventually resemble an OCA. As potential candidates for such building blocks, some sort of fiscal union and lender of last resort may qualify, drawing on the experiences of other currency unions and federal states. The financial and debt crisis has revealed that the endogenous forces within a currency union may be too slow to absorb the shocks originating from the crisis. For a currency union to survive in such a situation it is all the more important that the OCA criteria are met and/or that complementary institutions are in place. However, as actual developments in the Eurozone reveal, the political process of approaching an OCA is piecemeal rathe...

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“…In our empirical analysis, we start with a comparison of simple correlation coefficients, but continue with both parametric and nonparametric estimations in the spirit of 2 There exists no exact definition as to which countries belong to the core or to the periphery. With regards to the latter, the literature nearly unanimously includes Portugal, Spain, Ireland and Greece, with Italy being sometimes excluded (Lehwald, 2013). For the former, we follow a geographical definition and include France in the group of core countries, as opposed to studies clustering along country-specific economic policies (Schäfer, 2016).…”

Section: Introductionmentioning

confidence: 99%

“…The tumultuous period of the financial crisis and the following sovereign debt crisis brought deep economic imbalances within the EMU to the limelight (Lane, 2012 (Harding andPagan, 2002, 2006;Artis et al, 2004;Grigoraş and Stanciu, 2016), dynamic factor models (Lee, 2013;Lehwald, 2013;Kose et al, 2003), dynamic correlations (Croux et al, 2001;Fidrmuc and Korhonen, 2010), rolling coefficients (Gayer, 2007), correlation coefficients (Furceri and Karras, 2008) We focus on gross domestic product as our main indicator for business cycle movements for two reasons: it is (i) the most comprehensive measure for aggregate economic activity and (ii) the most widely used and accepted measure in the academic literature and in the general public Grigoraş and Stanciu, 2016). …”

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confidence: 99%