Who will be the next in line to join the Euro Area? A business cycle synchronization evidence
DOI:
https://doi.org/10.14665/1614-4007-29-1-003Keywords:
Euro Area, candidate countries, Hodrick-Prescott filter, business cycle synchronisationAbstract
This paper investigates business cycle synchronisation between seven-candidate countries to the Euro Area (EA) – Bulgaria, Czech Republic, Croatia, Hungary, Poland, Romania, and Sweden – and the Euro Area (EA-12/EA-19), France, and Germany. The Hodrick-Prescott filter decomposes the real Gross Domestic Product into trend and cyclical components for the period 1995Q1-2019Q4. The results indicate the existence of a strong business cycle synchronisation between Sweden and the Euro Area, Germany, and France. The second highest correlation was observed for the Czech Republic, followed by Hungary, Poland, and Croatia. In contrast, Bulgaria and Romania show the weakest business cycle synchronisation with both the Euro Area and the core economies. We conclude that Sweden is the most prepared country to be the next passenger in the single currency train from business cycle synchronisation.
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