Exploring CESEE-EMU Synchronisation Patterns
Author:Valerija Botrić and Tanja Broz
JEL:F15, E32
DOI:
Keywords:business cycle synchronisation, economic integration, Central and South-
Eastern European countries, Eurozone
Abstract:
We study the degree of business cycle similarity between the Central and South-Eastern
European (CESEE) countries and the Eurozone members. The special emphasis is put on
the differences between countries that have already joined the European Union and those
that are in different stages of integration. We introduce a specific measure of business cycle
synchronisation by comparing the evolution of the growth rates in country pairs and further
seek to identify determinants of these synchronisation patterns using pooled probit model.
The results of the analysis have indicated that the real effective exchange rate seems to be
an important predictor of synchronisation between CESSEE countries and the original
Eurozone members. Our results have also indicated that trade becomes important
synchronisation factor only for the countries that became EU members during the analysed
period. The trade creation possibilities emerging from the common market seem to change
the trade patterns in countries that became the EU members during the analysed period and
contribute positively to the overall business synchronisation. This result seems encouraging
for the EU aspiring countries.