Business cycle synchronisation in a currency union : Taking stock of the evidence

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Title: Business cycle synchronisation in a currency union : Taking stock of the evidence
Author: Campos, Nauro F. ; Fidrmuc, Jarko ; Korhonen, Iikka
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
Series number: 28/2017
Year of publication: 2017
Publication date: 20.9.2017
Published in: Published in International Review of Financial Analysis 61 ; January ; 2019
Pages: 62
Subject (yso): euro
Keywords: EMU; valuuttaunionit; suhdanteet; synkronisaatio; Eurooppa; optimaalinen valuutta-alue
JEL: E32; F42
Other keywords: business cycles synchronisation; optimum currency areas; EMU; euro; meta-analysis
Abstract: This paper offers a first systematic evaluation of the evidence on the effects of currency unions on the synchronisation of economic activity. Focusing on Europe, we construct a database of about 3,000 business cycle synchronisation coefficients as well as their design and estimation characteristics. We find that: (1) synchronisation increased from about 0.4 before the introduction of the euro in 1999 to 0.6 afterwards; (2) this increase occurred in both euro and non-euro countries (larger in former); (3) there is evidence of country-specific publication bias; (4) our difference-in-differences estimates suggest the euro accounted for approximately half of the observed increase in synchronisation.

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