Working Paper: CEPR ID: DP5179
Authors: Zsolt Darvas; György Szapáry
Abstract: This paper analyses the synchronization of business cycles between new and old EU members using various measures. The main findings are that Hungary, Poland and Slovenia have achieved a high degree of synchronization for GDP, industry and exports, but not for consumption and services. The other CEECs have achieved less or no synchronization. There has been significant increase in synchronization of GDP and its major components within EMU. This lends support to the argument of OCA endogeneity but there is also evidence of a world cycle. The consumption-correlation puzzle remains, but its magnitude has greatly diminished in the EMU members.
Keywords: business cycle synchronization; consumption correlation puzzle; EMU; new EU members; OCA endogeneity
JEL Codes: E32; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hungary, Poland, and Slovenia's economic policies and integration into the euro zone (F36) | high degree of synchronization for GDP, industry, and exports (F69) |
| increased trade integration and economic cooperation (F15) | increase in synchronization observed in CEECs (F36) |
| local economic conditions and policies (R38) | less or no synchronization among other CEECs (F36) |
| participation in a currency union (F36) | greater synchronization of business cycles (F44) |