OECD Journal: Journal of Business Cycle Measurement and Analysis

Frequency
Semiannual
ISSN: 
1995-2899 (online)
ISSN: 
1995-2880 (print)
http://dx.doi.org/10.1787/19952899
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The Journal of Business Cycle Measurement and Analysis has been discontinued as of 24 June 2016. This journal was published jointly with CIRET from 2004 to 2015. For more information see www.ciret.org/jbcy.

Article
 

Are the New Member States Converging on the Euro Area?

A Business Cycle Analysis for Economies in Transition You do not have access to this content

English
 
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    http://oecd.metastore.ingenta.com/content/3311021ec003.pdf
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Author(s):
Andrew Hughes Hallett, Christian R. Richter
05 Jan 2012
Pages:
20
Bibliographic information
No.:
6,
Volume:
2011,
Issue:
2
Pages:
49–68
http://dx.doi.org/10.1787/jbcma-2011-5kg0nvzlqkf0

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The Optimal Currency Area theory stresses the importance of co-movement of the business cycles of member states in order for the common currency to be successful. Yet, the identification of (European) business cycles has been inconclusive and is complicated by the enlargement to the new member states in 2004 and their transition to market economies. In this paper, we show how to decompose a business cycle into a time-frequency framework in a way that allows us to compare the growth rate spectra and coherences for the Hungarian, Polish, Czech, German and French economies. We find that, since joining the EU, there has been convergence on the euro area economy at short cycle lengths, but little convergence in long cycles. We argue that this shows evidence of nominal convergence, but little real convergence. The standard Maastricht convergence criteria for membership of the euro therefore need to be adapted to test for real convergence.
JEL Classification: C22, C29, C49, F43, O49
Keywords: Time-Frequency Analysis, Coherence, Growth Rates, Business Cycles
 
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