Wavelet Analysis of Business Cycle Synchronization in Europe
(2018) NEKN01 20181Department of Economics
- Abstract
- Business cycle synchronization is an essential criterion for creating and maintaining an optimal currency area. In this paper, it is investigated whether this required criterion holds for the Euro area at different time horizons (short run, medium run and long run), and if the financial crisis of 2007-2008 influenced the degree of synchronization in Europe. Wavelet analysis on the real GDP growth and unemployment rate is used to investigate business cycle synchronization between the EU-15 countries. The data is decomposed into time and frequency using both the continuous wavelet transform and the discrete wavelet transform, and varimax rotated principal component analysis is used to investigate business cycle synchronization at the... (More)
- Business cycle synchronization is an essential criterion for creating and maintaining an optimal currency area. In this paper, it is investigated whether this required criterion holds for the Euro area at different time horizons (short run, medium run and long run), and if the financial crisis of 2007-2008 influenced the degree of synchronization in Europe. Wavelet analysis on the real GDP growth and unemployment rate is used to investigate business cycle synchronization between the EU-15 countries. The data is decomposed into time and frequency using both the continuous wavelet transform and the discrete wavelet transform, and varimax rotated principal component analysis is used to investigate business cycle synchronization at the different time horizons. It is found that there is a high degree of business cycle synchronization in Europe for the different time horizons considered, however the core is more synchronized while some peripheral countries tend to diverge. Furthermore, our results also suggest that there has been an increase in business cycle synchronization after the financial crisis for the core but not for some peripheral countries. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8947529
- author
- Nielsen, Glenn LU
- supervisor
- organization
- course
- NEKN01 20181
- year
- 2018
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- wavelet analysis, business cycle synchronization, principal component analysis, Euro area, optimum currency area
- language
- English
- id
- 8947529
- date added to LUP
- 2018-07-03 14:23:23
- date last changed
- 2018-07-03 14:23:23
@misc{8947529, abstract = {{Business cycle synchronization is an essential criterion for creating and maintaining an optimal currency area. In this paper, it is investigated whether this required criterion holds for the Euro area at different time horizons (short run, medium run and long run), and if the financial crisis of 2007-2008 influenced the degree of synchronization in Europe. Wavelet analysis on the real GDP growth and unemployment rate is used to investigate business cycle synchronization between the EU-15 countries. The data is decomposed into time and frequency using both the continuous wavelet transform and the discrete wavelet transform, and varimax rotated principal component analysis is used to investigate business cycle synchronization at the different time horizons. It is found that there is a high degree of business cycle synchronization in Europe for the different time horizons considered, however the core is more synchronized while some peripheral countries tend to diverge. Furthermore, our results also suggest that there has been an increase in business cycle synchronization after the financial crisis for the core but not for some peripheral countries.}}, author = {{Nielsen, Glenn}}, language = {{eng}}, note = {{Student Paper}}, title = {{Wavelet Analysis of Business Cycle Synchronization in Europe}}, year = {{2018}}, }