Business cycle convergence or decoupling? : Economic adjustment in CESEE during the crisis

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dc.contributor Bank of Finland
dc.contributor.author Gächter, Simon
dc.contributor.author Riedl, Alesandra
dc.contributor.author Ritzberger-Grünwald, Doris
dc.date.accessioned 2014-09-22T08:00:20Z
dc.date.available 2014-09-22T08:00:20Z
dc.date.issued 2013
dc.identifier.issn 1456-5889
dc.identifier.uri https://helda.helsinki.fi/bof/handle/123456789/8181
dc.description.abstract We analyze business cycle convergence in the EU by focusing on the decoupling vs. convergence hypothesis for central, eastern and south eastern Europe (CESEE). In a nutshell, we find that business cycles in CESEE have decoupled considerably from the euro area (EA) during the financial crisis in terms of both cyclical dispersion (i.e. the deviation of output gaps) and cyclical correlation. The results are mainly driven by smaller countries, which can be explained by the fact that small economies seem to have larger cyclical swings as they are more dependent on external demand, which causes a decoupling in terms of higher output gap deviations from the EA cycle in times of economic crises. At the same time, this does not necessarily affect business cycle synchronization as measured by cyclical correlations, where the strength of the linear relationship of two cycles is measured. However, despite the recent declines in the co-movement, we generally observe high correlation levels of CESEE countries with the EA after their EU accession in 2004. Finally, we find a significant decoupling of trend growth rates between EA and CESEE until the onset of the financial crises. Since the beginning of the crisis, trend growth rates have declined both in CESEE and the EA with the trend growth differential decreasing significantly from about three to below two percentage points in 2011. JEL classification: E32, E52, F15, F33, F44; Keywords: Business cycles, EMU, CESEE, optimum currency areas
dc.format.extent 25 s.
dc.language.iso eng
dc.rights https://helda.helsinki.fi/bof/copyright
dc.subject suhdanteet
dc.subject lähentyminen
dc.subject EMU
dc.subject KIE
dc.subject Itä-Eurooppa
dc.subject EU
dc.subject euroalue
dc.subject talouskasvu
dc.subject kriisit
dc.subject SP
dc.subject RP
dc.subject RP ST
dc.subject Bofit-kokoelma
dc.subject korrelaatio
dc.subject synkronointi
dc.title Business cycle convergence or decoupling? : Economic adjustment in CESEE during the crisis
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-201408071921
dc.subject.jel E32
dc.subject.jel E52
dc.subject.jel F15
dc.subject.jel F33
dc.subject.jel F44
dc.series.name BOFIT Discussion Papers
dc.series.year 2013
dc.series.number 3/2013
dc.series.sortingnumber 3
dc.date.publication 5.2.2013
dc.contributor.orgunit Institute for Economies in Transition (BOFIT)

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