How fused is the euro area core?: An evaluation of growth cycle co-movement and synchronization using wavelet analysis

Abstract

This paper uses several recent advances in time-varying spectral methods to analyse the growth cycles of the core of the euro area in terms of frequency content and phasing of cycles. There are two main findings. First that coherence and phasing between the three core members of the euro area (France, Germany and Italy) continue to differ, and that for France they increased in the 1990s but not noticeably since the launch of the euro. Second that similarities vary considerably according to the length of cycle. They are high for low frequencies but lower at traditional business cycle frequencies. Simply looking at business cycles loses much of the detail of the extent of co-movement in different frequency cycles within the euro area.