Business Cycle Synchronization of CEE Countries with the Euro Area. Between Core and Periphery

Abstract

In this study, we aimed to assess the degree of business cycle synchronisation in five CEE countries that have not adopted the euro (Romania, Bulgaria, Hungary, Poland and the Czech Republic), from the perspective of investigating similar developments with the three most important countries of the monetary union (Germany, France and Italy), respectively, with the peripheral countries most affected by the sovereign debt crisis (Greece, Portugal and Spain). The results confirm that membership of the monetary union does not automatically reduce the potential for asymmetric shocks, as in the case of peripheral countries, and that CEE countries do not have a similar path of improving business cycle synchronisation, with Romania and Bulgaria being closer to the Greek experience.