Are European business cycles close enough to be just one

TLDR: In this paper, the authors propose a comprehensive methodology to characterize the business cycle comovements across European economies and some industrialized countries, without imposing any given given model but trying to leave the data speak.

About: This article is published in Journal of Economic Dynamics and Control.The article was published on 2006-09-01 and is currently open access. It has received 196 citations till now. The article focuses on the topics: Economic integration & Business cycle.

Figures

Figure 7

Figure 8 Non-hierarchical clustering (Kaufman and Rousseeuw, 1990)

Figure 10 Density function of distances across 27 European countries

Figure 9 Density functions of distances across 27 points

Table 6

Table 5 Is there an European Attractor? Some important statistics

Frequently asked questions

Q1. What are the contributions in "Are european business cycles close enough to be just one? are european business cycles close enough to be just one?(*)" ?

The authors propose a comprehensive methodology to characterize the business cycle comovements across European economies and some industrialized countries, always trying to “ leave the data speak ”. Out of this framework, the authors propose a novel method to show that there is no an “ Euro economy ” that acts as an attractor to the other economies of the area. The authors show that the relative comovements across EU economies are prior to the establishment of the Monetary Union. The authors are able to explain an important proportion of the distances across their business cycles using macrovariables related to the structure of the economy, to the directions of trade, and to the size of the public sector. Finally, the authors show that the distances across countries that belong to the European Union are smaller than the distances across newcomers. 

Q2. How do the authors calculate the correlation coe cients?

after calculating the Fisher transformation, the authors use the delta method to obtain the standard errors of the correlation coe cients. 

Q3. Why do the authors think that the null of no correlation test is biased?

the authors think that this test may be biased to reject the null of no correlation simply because there are more zeroes than ones in the countries’ reference cycles18since expansions are typically longer than recessions. 

Q4. What is the definition of the -period ahead forecast error?

Out of this specification, the -period ahead forecast error is+ + = 1X=0+ (6)5Den Haan presents a more general model by allowing for both linear and quadratic deterministic trends. 

Q5. What is the way to classify data into groups?

They classify the data into groups ( is given by the user) satisfying the requirements that each group must contains at least one object, and that each object must belong to exactly one group. 

Q6. What is the percentage of the group of countries experiencing the first recession of the new century?

In this respect, while more than 80% of the European countries experienced the first recession of the new century, this percentage is less than 40% for the group of accessing countries. 

Q7. How does Den Haan propose to solve these problems?

In order to solve these problems he proposes to use the correlations of the VAR forecast errors at di erent horizons as a measure of comovements of the series.