- Additional Authors
- Mitchell, James.
- Found In
- Journal of Business Cycle Measurement and Analysis Vol. 2004, no. 3, p. 275-307 1729-3626
- Description
- 33 p.
- Summary
- This paper, using 40 years of monthly industrial production data, examines the relationship between the business cycles of the 12 euro area countries. Since estimates of the business cycle have been found to be sensitive to how the cycle is measured, a range of alternative measures is considered. We focus on both parametric and nonparametric univariate measures of the "classical" and "growth" cycles. We then investigate whether euro area business cycles have converged. This is based on a descriptive analysis of the distribution of bivariate correlation coefficients between the 12 countries' business cycles. This extends previous work that has looked for convergence, in a similar manner by focusing on correlation, but has not considered the entire distribution, instead focusing on the mean correlation coefficient or particular bivariate correlation coefficients. Moreover, exploiting the panel of correlation coefficients we propose a statistical test for convergence based on estimation of a dynamic heterogeneous panel data model. Although empirical inference about individual euro area business cycles is found to be sensitive to the measure of the business cycle considered, our findings about convergence between the euro area business cycles exhibit similarities across the alternative measures of the business cycle. Interestingly, we find that there have been periods of convergence, identified by the distribution tending to unity, and periods of divergence. The most recent estimates suggest that correlation between the 12 European cycles is statistically positive, and has risen from a trough in the early 1990s. This is confirmed by the test for convergence, which indicates that, despite some volatility over the last 20 years, the long-run trend is for rising correlation between euro area business cycles.
- Subject
- Economics
- LCCN
- 10.1787/jbcma-v2004-art16-en
- OCLC
- oecd-lib-001272
- Author
Massmann, Michael.
- Title
Reconsidering the Evidence [electronic resource]: Are Euro Area Business Cycles Converging? / Michael Massmann and James Mitchell
- Imprint
Paris : OECD Publishing, 2005.
- Connect to:
- Indexed Term
Economics
- Added Author
Mitchell, James.
- Found In:
Journal of Business Cycle Measurement and Analysis Vol. 2004, no. 3, p. 275-307 2004:3<275 1729-3626
- Other Standard Identifier
10.1787/jbcma-v2004-art16-en doi