New Parametric Synchronization Measures of Cyclical Fluctuation

• Activity Number: 490
• Type: Topic Contributed
• Date/Time: Wednesday, August 6, 2014 : 10:30 AM to 12:20 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Gian Luigi Mazzi*+
• Companies: Eurostat
• Keywords: Business cycle analysis ; Garch models ; Synchronisation measures ; Markov-switching models

Abstract

Measuring the degree of synchronisation among countries provides an important piece of information for policy makers. In a common currency area, such as the Euro area, we are expecting a progressively increase of the degree of synchronisation but empirical investigation does not confirm this statement. This paper shows two new parametric synchronisation measures based respectively on dynamic correlation coefficients and on the coincident turning points indicators for the Euro area and its largest economies. The results of empirical investigation based on the new synchronisation measures show that the degree of synchronisation varies during the time and across the cyclical phases. Furthermore, the degree of synchronisation is structurally higher between some Euro area economies and lower between others. Finally, we observed a decrease of the synchronisation of the business cycles after the 2008-2009 crisis due to the lack of diffusion of the 2011 peak among the Euro are economies. By contrast, the 2011 peak of the growth cycle was characterised by a high degree of diffusion among the Euro area economies with positive consequences on the degree of the growth cycle synchronisation.