OECD Journal: Journal of Business Cycle Measurement and Analysis

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.


Keywords: business tendency, economic measurement, economic statistics, cyclical indicators, business surveys, business cycles, economic research, business investment, consumer surveys, economic indicators, economic cycle, cyclical fluctuations, short-term, economic analysis

Are the New Member States Converging on the Euro Area?

A Business Cycle Analysis for Economies in Transition

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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