The European growth synchronization through crises and structural changes

In light of several economic and financial crises and institutional changes experienced by the European countries, we examine whether these economies achieved synchronization of their business cycles and fostered synchronization of their growth rates. Controlling for reverse causality, we conduct mu...

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Bibliographic Details
Published in:Studies in nonlinear dynamics and econometrics 2021-02, Vol.25 (1), p.1-17
Main Authors: Uctum, Merih, Uctum, Remzi, Vijverberg, Chu-Ping C.
Format: Article
Language:English
Subjects:
Bias
Business cycles
Causality
Change agents
Convergence
crises
Economic crisis
Economic growth
Endogenous
EU membership
Euro
Eurozone
growth synchronization
Quantitative Finance
structural breaks
Synchronism
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Summary:In light of several economic and financial crises and institutional changes experienced by the European countries, we examine whether these economies achieved synchronization of their business cycles and fostered synchronization of their growth rates. Controlling for reverse causality, we conduct multiple endogenous break tests and find that (i) several endogenous break dates correspond to idiosyncratic shocks affecting individual countries or major shocks in international arena but not the adoption of the euro; this result suggests that the convergence process has been nonlinear for a number of countries and that studies imposing break dates exogenously, such as the launch of euro, may lead to biased conclusions; (ii) while output growth was increasingly synchronized for some countries, integration occurred in an asymmetric way and it did not change or did not occur for others despite being in the same common currency area (iii) convergence has been prevalent among the non-Eurozone economies in our sample.
ISSN:1081-1826
1558-3708
DOI:10.1515/snde-2018-0097