Working Paper: CEPR ID: DP4457
Authors: Michael J. Artis; Massimiliano Marcellino; Tommaso Proietti
Abstract: We analyse the evolution of the business cycle in the accession countries, after a careful examination of the seasonal properties of the available series and the required modification of the cycle dating procedures. We then focus on the degree of cyclical concordance within the group of accession countries, which turns out to be in general lower than that between the existing EU countries (the Baltic countries constitute an exception). With respect to the euro zone, the indications of synchronization are also generally low and lower relative to the position obtaining for countries taking part in previous enlargements (with the exceptions of Poland, Slovenia and Hungary). In the light of the optimal currency area literature, these results cast doubts on the usefulness of adopting the euro in the near future for most accession countries, though other criteria such as the extent of trade and the gains in credibility may point in a different direction.
Keywords: business cycles; cycle synchronization; dating algorithms; EU enlargement; seasonal adjustment
JEL Codes: C19; C40; E32; E39
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| degree of cyclical concordance within accession countries (F44) | degree of cyclical concordance between existing EU countries (F36) |
| low synchronization (C69) | challenges for adopting the euro (F36) |
| GDP data used (E01) | lower synchronization levels (C69) |
| Poland, Slovenia, and Hungary (P29) | higher degrees of cyclical synchronicity compared to other accession countries (F44) |