Towards the Similarity of the Countries in Terms of Business Cycle Synchronization and Income Level Equalization–Empirical Analysis

Abstract

According to the convergence hypothesis, less developed countries exhibit faster economic growth than more developed ones, that leads to the equalization of income levels between countries. The aim of the article is to verify the β convergence hypothesis in the entire EU28 group basing on the monthly data. Structural breaks in 2008 and 2013 have been introduced into the model basing on the turning points in the economic growth paths of the EU countries. The main value added of the article is an assessment of monthly estimates of the rate of convergence with the use of the extrapolated data. The latter has been acquired with the use of monthly economic sentiment indicator based on the survey data. The β convergence hypothesis has been positively validated with the use of monthly data. However, different rate of convergence has been spotted between different turning points. Furthermore, big deviations of the estimates for extrapolated monthly data compared to the results based on the observed annual time series can be observed. The research focused on convergence on a monthly basis enables more profound analysis of the Gross Domestic Product (GDP) growth paths in the EU countries.