Investigating the Synchronization of Business and Growth Cycles in Maghreb Countries: A Dynamic MS-BVAR Analysis

Abstract

This analysis utilizes data from February 2000 to December 2023 to investigate Tunisia's growth and the synchronization of its classical cycle with Morocco and Algeria. A Markov-Switching Bayesian Vector Autoregression (MS-BVAR) model-based advanced econometric approach is employed to investigate the alignment of economic dynamics and regional cooperation. MS-BVAR analyzes regime changes and cyclical co-movements. The study also examines the impact of trade integration, macroeconomic policy, and institutions on the business cycle synchronization of three Arab Maghreb Union (AMU) countries. The analysis clarifies these secondary objectives to enhance knowledge of economic convergence mechanisms and prevent the dispersion of the study framework. This method links methodology to expected findings, ensuring consistency in interpreting regional economic dynamics. The growth and economic cycles of the AMU countries have shifted. This highlights the structural differences in their economies. Although the AMU exists despite asymmetric shocks, experience demonstrates that such inequalities hinder policy efficacy. Fiscal transfers and coordination are needed to correct structural divergences. North Africa can cooperate, but misaligned economic cycles can cause policy mismatches. Better synchronization reduces costly modifications and makes policy more predictable, improving cooperation. Instead of ruling out collaboration, the study emphasizes adaptive policies that overcome asymmetries.